Pound Struggling amid Calls for May’s Resignation
While the UK’s headline consumer price index did accelerate in April, it came in below forecast and failed to lend any support to the struggling Pound.
With inflation above the Bank of England’s (BoE) target at 2.1% and wage growth easing household finances look set to come under further pressure in the months ahead.
Political anxiety also weighed heavily on GBP exchange rates amid reports that cabinet MPs were moving to oust Theresa May over Brexit.
The mood towards the Pound is unlikely to see any significant improvement as political developments unfold and fears of a potential no-deal Brexit persist.
Euro Shakes Off Draghi Comments
Comments from European Central Bank (ECB) President Mario Draghi failed to provoke any particular volatility for the Euro yesterday as he offered no fresh clues over the current policy outlook.
While the Euro continues trending higher against a struggling Pound, EUR/USD declined following the release of the latest PMI figures for Germany.
Manufacturing output in the Eurozone’s largest economy remained in contraction, and the Services PMI eased lower-than-forecast.
The minutes from the ECB’s last policy meeting could provoke more Euro movement in the hours ahead.
Escalating Trade Tensions Support US Dollar
As pressure continued to pile on Chinese telecoms giant Huawei, and the Trump administration suggested the potential blacklisting of other Chinese tech firms, USD exchange rates benefitted from safe-haven demand.
With markets seeing the potential for the trade spat to develop into a cold war over technology, a sense of risk aversion helped to limit pressure on the US Dollar. Even so, anxiety over the future path of Federal Reserve monetary policy saw USD exchange rates losing some of their momentum, with the FOMC meeting minutes urging patience on rate hikes.
If US new home sales contract as forecast in April this may leave the US Dollar on a generally weaker footing against its rivals.
Higher US Oil Production Weighs on Canadian Dollar
Another increase in US crude oil production left the Canadian Dollar on a downtrend as oil prices slumped once again. With the US continuing to raise its oil output the risk of a renewed global supply glut remains, in spite of escalating tensions within the Middle East.
A general risk-off market also diminished demand for the commodity-correlated Canadian Dollar.
A stronger showing from March’s Canadian wholesale trade sales data could encourage CAD exchange rates to pick up this afternoon.
Australian PMIs Beat Forecasts
A weak reading from April’s Westpac leading index left the Australian Dollar on the back foot yesterday. As the index dropped to -0.1% this raised concerns over the outlook of the Australian economy, with signs pointing towards a fresh slowdown.
Coupled with the ongoing sense of market anxiety over the escalating US-China trade dispute investors saw little reason to favour the antipodean currency, leaving AUD exchange rates exposed to selling pressure.
While the Australian Manufacturing and Services PMIs came in higher than forecast, the ‘Aussie’ was only able to gain on the embattled pound.
Slowing Retail Sales Drag on New Zealand Dollar
Although retail sales excluding inflation bettered forecasts in the first quarter, clocking in at 0.7% rather than 0.6%, this still represented a sharp decline on the quarter. As a result, the mood towards the New Zealand Dollar soured further on Wednesday as confidence in the outlook of the domestic economy continued to deteriorate. A decline in prices at the latest Global Dairy Trade auction added to the bearishness of NZD exchange rates.
Investors will now be looking out for tonight’s New Zealand trade data.