Downgraded UK Growth Forecasts Limit Pound Demand
The Pound came under pressure on Monday as leading forecaster EY Item Club downgraded its UK growth projections for 2019 and 2020.
This fresh warning that Brexit uncertainty could drag on the economy throughout the remainder of the year left GBP exchange rates under pressure once again. With MPs still failing to make any tangible progress towards a Brexit compromise the appeal of the Pound proved limited.
Overnight the GfK Consumer Confidence index came in at -13, unchanged from the previous month. The Lloyds Business Barometer, meanwhile, increased from 10 to 14.
With no further UK data due today the Pound may trade statically.
Weakened Eurozone Confidence Weighs on Euro
Less-than-impressive data from the Eurozone limited the Euro’s potential for gains on Monday. April’s Eurozone economic confidence index weakened further than forecast, falling from 105.6 to 104.0 this month.
Coupled with another decline in consumer confidence this added to market worries over the outlook of the Eurozone economy. As Sunday’s Spanish general election failed to deliver a parliamentary majority for the centre-left PSOE a sense of political uncertainty also weighed on EUR exchange rates.
However, the Euro could advance later today if Germany’s inflation data shows an increase in consumer price pressures.
Disappointing Inflation Data Limits US Dollar Appeal
In another underwhelming development for the US economy, March’s personal consumption expenditure core data missed expectations.
Crucially, the headline core PCE eased from 1.7% to 1.6% on the year, indicating that inflationary pressure diminished.
This further undermined the case for the Federal Reserve to raise interest rates in the coming months, given that the PCE remains the central bank’s preferred measure of inflation.
An uptick in today’s US consumer confidence index may see USD exchange rates strengthening once again, however.
Weakening Oil Prices Drag on Canadian Dollar
The bearish mood of the global oil market saw the Canadian Dollar trending lower at the start of the week as the impact of the latest pushback against Iranian oil supply faded. Although market risk appetite generally improved in the face of a weaker US Dollar this was not enough to prevent CAD exchange rates losing ground.
As forecasts point towards the Canadian gross domestic product faltering further in February the Canadian Dollar looks set to weaken further today.
Australian Dollar Dips after Chinese PMIs
The Australian Dollar slipped overnight as China’s manufacturing and non-manufacturing PMIs showed a decline in output.
The ‘Aussie’ was also pressured lower by a drop in Australian Private Sector Credit from 4.1% to 3.9%.
If the next notable Australian report, the AiG Performance of Manufacturing Index, also comes in below-forecast the Australian Dollar could extend losses.
New Zealand Dollar Muted Ahead of Unemployment Data
NZD exchange rates fluctuated as anticipation mounted for this week’s raft of New Zealand data.
Overnight the ANZ Activity Outlook index for New Zealand Improved from 6.3 to 7.1, but the potential for NZD gains was limited ahead of this evening’s employment data.