Confidence in the Pound was still lacking today even as Theresa May continues to cling onto power and the Conservative leadership. A sense of political uncertainty is still hanging over the UK outlook at this juncture, given the controversial nature of the proposed Conservative-DUP alliance. With markets doubtful as to May’s ability to remain Prime Minister in the long run and the issue of Brexit already complicated further investors have seen no reason to favour Sterling.
The single currency started the week with a sense of optimism, meanwhile, as the results of the first round of the French parliamentary elections came in. President Emmanuel Macron’s fledgling En Marche movement looks set to win a landslide, allowing him to pursue his economic agenda with greater ease. Naturally this boosted confidence in the Euro, even though concerns remain over Greece and the delayed disbursement of its next tranche of bailout funds.
Even though market risk appetite proved rather muted on Monday this was not enough to particularly bolster the appeal of the US Dollar. However, while recent domestic data has proven rather disappointing the odds are still on for the Federal Reserve to raise interest rates on Wednesday. With an imminent hike effectively priced into the ‘Greenback’, though, its upside potential is distinctly limited at this juncture.
In the absence of fresh Australian data the ‘Aussie’ struggled to find any particular support against its rivals. With copper and other base metal prices still under pressure, and expected to trend lower in coming months, the appeal of the commodity-correlated Australian Dollar remains decidedly limited. The mood towards the antipodean currency could sour further tomorrow, if the latest NAB business confidence index proves discouraging.
New Zealand Dollar
An unexpected contraction in domestic card spending put pressure on the New Zealand Dollar at the start of the week. This weaker showing suggested that consumer confidence weakened in May, increasing concerns over the outlook of the economy as spending activity slows. With market risk appetite generally limited there was little in the way of support for the ‘Kiwi’. However, if the first quarter current account balance shows a return to surplus on Tuesday NZD exchange rates could rally.
Although concerns over the global oil oversupply glut persisted the price of Brent crude picked up once again on Monday. After several days of weakness demand for oil improved, with investors betting on an imminent technical bounce. This offered support to the commodity-correlated Canadian Dollar even as the general market appetite for higher-yielding assets softened. Even so, if US stockpiles show a further build-up on the week this could see the ‘Loonie’ come under renewed pressure.
This week the US Dollar was touching three-year highs when valued against a basket of major currencies. The greenback’s traditional role as one of the safe-haven currencies is helped by a domestic economy that is largely immune to the threats of the coronavirus.
Last update: 22 Feb, 2020
The strong start to the year for “risk-on” currencies is already a distant memory.
Posted: 3 Feb, 2020
The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.
Last update: 8 Jan, 2020