Pound (GBP) Down From Best Levels Despite Consumer Confidence Uptick
While February’s GfK consumer confidence index showed a surprise improvement on the month, the Pound struggled to capitalise on the result. As confidence among UK consumers remains in the negative at -13 this gave investors limited cause for optimism.
With the initial bout of bullishness that followed the decline in the odds of a no-deal Brexit fading GBP exchange rates moved away from their recent highs.
Today’s manufacturing PMI could weigh on the Pound if it shows a decline in output.
Rising German Inflation Boosts Euro (EUR)
Germany’s consumer price index bettered forecasts in February, with the annual inflation rate accelerating to 1.6%.
Although this falls short of the European Central Bank’s (ECB) 2% target, the uptick still offered a bit of a boost to the Euro. Markets are hopeful that this improvement could encourage ECB policymakers to take a less dovish outlook on monetary policy in the months ahead, reducing the risk of fresh monetary loosening.
If the Eurozone consumer price index shows a similar improvement on the month the Euro could extend gains today.
US Dollar (USD) Stumbles as US Economy Loses Momentum
The US Dollar came under pressure yesterday as the fourth quarter annualised US gross domestic product report showed a sharp slowdown on the quarter, with growth easing from 3.4% to 2.6%. This decline was partly driven by a drop in export volumes, indicating that the Trump administration’s protectionist policies are dragging on the US economy.
All in all, this slowdown in growth is likely to keep the Federal Reserve of a mind to leave interest rates on hold for longer. Even so, with market risk appetite deteriorating the US Dollar found some support.
A steady showing from today’s personal consumption expenditure report could offer USD exchange rates a fresh rallying point, given that the measure remains the Fed’s preferred gauge of inflation.
Widening Current Account Deficit Dents Canadian Dollar (CAD)
The appeal of the Canadian Dollar was limited yesterday as the Canadian fourth quarter current account deficit widened further than forecast.
The widening deficit does not bode well for the health of the Canadian economy, giving the Bank of Canada (BOC) additional incentive to keep policy on hold. While the Canadian Dollar was able to hold a stronger footing against its risk-sensitive rivals, this underwhelming data still saw CAD exchange rates generally soften.
Slowing growth may drag the Canadian Dollar down today if December’s gross domestic product data weakens as anticipated.
Risk Aversion Encourages Australian Dollar (AUD) Losses
Escalating geopolitical tensions weighed heavily on the Australian Dollar yesterday, with investors finding little incentive to favour risk-sensitive assets.
The breakdown of the US-North Korea summit put additional pressure on AUD exchange rates as hopes of progress faded. An unexpectedly sharp dip in the latest Chinese manufacturing PMI also drove the Australian Dollar lower against its rivals.
Some respite was offered to the Australian Dollar as the AiG Performance of Manufacturing Index for February improved from 52.5 to 54.0.
Tumbling Business Confidence Weighs on New Zealand Dollar (NZD)
A fresh decline in the ANZ activity outlook index saw NZD exchange rates shed further ground yesterday. The corresponding business confidence index also dropped sharply on the month, raising fresh concerns over the outlook of the New Zealand economy.
With market risk appetite generally deteriorating in response to geopolitical tensions there was little to support the New Zealand Dollar.