Pound Sterling Could Gain on Rising UK Inflation
The Pound was able to push slightly higher across the board yesterday, despite the political uncertainty hanging over the UK. Sterling benefited from the news that the OECD raised its 2019 growth forecast for the UK, even as it cut the global growth forecast.
However, the latest CBI industrial trends orders index proved discouraging, falling from -5 to -10 on the month as export orders fell to their lowest level in nearly three years.
GBP has given up its gains this morning ahead of the release of the UK’s consumer price index for April. An increase in consumer price pressures could prove pound-supportive.
Euro Struggles to Capitalise on Rising Consumer Confidence
May’s Eurozone consumer confidence index bettered forecasts on Tuesday, strengthening from -7.9 to -6.5. Although the index remains firmly within negative territory investors still took encouragement from the monthly uptick, which suggests lower levels of domestic anxiety.
However, as the OECD lowered its German growth forecast for 2019 the Euro’s potential for gains was limited.
A dovish speech from European Central Bank (ECB) President Mario Draghi could put pressure on the Euro this afternoon.
Home Sales Contraction Limits US Dollar Upside
US existing home sales failed to rebound as anticipated in April, delivering another contraction on the month as the housing sector continues to demonstrate signs of a slowdown.
This disappointing result capped USD strength yesterday despite the risk-off environment.
The release of minutes from the latest Federal Open Market Committee (FOMC) meeting could cause some US Dollar movement this evening.
Rising Oil Prices Benefit Canadian Dollar
In the absence of any fresh Canadian data, CAD exchange rates continued to follow the trend of the oil market, benefitting from ongoing optimism.
Escalating tensions within the Middle East continue to fuel demand for oil, with markets betting on the prospect of a further decline in production in the months ahead. This helped to shore up the Canadian Dollar.
A stronger month of Canadian retail sales may encourage CAD exchange rates to strengthen further today.
RBA Dovishness Weighs on Australian Dollar
Comments from Reserve Bank of Australia (RBA) Governor Philip Lowe saw the Australian Dollar trending sharply lower yesterday. Investors were caught off guard by the dovish nature of Lowe’s message as he warned that inflation will not reach its target as long as the current level of unemployment persists. With the RBA looking increasingly likely to cut interest rates at its June meeting, AUD exchange rates were left on the back foot.
If tonight’s Australian PMI reports reveal a decline in output the Australian Dollar could come under additional pressure.
Interest Rate Cut Speculation Drives New Zealand Dollar Lower
A solid month of New Zealand credit card spending was not enough to prevent NZD exchange rates slipping yesterday. While domestic consumers continued to spend, the New Zealand Dollar was weighed down by the unexpectedly dovish comments from the RBA Governor. With the Reserve Bank of New Zealand (RBNZ) already biased towards the downside, the prospect of an Australian interest rate cut sharply increased the risk of imminent monetary tightening in NZ.
However, the New Zealand Dollar recouped some losses overnight as growth in domestic retail sales came in at 0.7% on the month – slightly higher than forecast.