Pound Sterling (GBP)
Although British economic data today showed that the Shop Price Index contracted by -2.0% and February’s Construction PMI unexpectedly slowed, the Pound advanced versus nearly all of its most traded currency rivals. The appreciation can be linked to corrective trading as investors fear that the depreciation following news that Boris Johnson supports the UK leaving the EU was overdone. This is not to say that EU referendum concerns aren’t present in traders’ minds, but there is still a long way to go before the vote in which Sterling could soften considerably.
After European Central Bank (ECB) Executive Board Member Benoit Coeure hinted heavily that the central bank will be employing aggressive stimulus measures this month, the Euro softened versus most of its currency peers. Persistently low inflation has been the main focus for ECB policymakers, and the latest drop in consumer prices suggests that the central bank will have no choice but to either cut the overnight cash rate, extend asset purchases or employ a combination of both. Demand for the Euro wasn’t aided by domestic data which showed Eurozone Producer prices remained critically low in January.
US Dollar (USD)
The US Dollar is also holding a weakened position versus most of its currency rivals amid mounting speculation that the Federal Reserve will look to avoid tightening policy for some time to come. The current global economic conditions do not present a good environment for less-accommodative policy measures at this time. Also providing US Dollar headwinds was domestic data which showed Mortgage Approvals contracted by -4.8% in the week ending February 26th.
Australian Dollar (AUD)
Australian fourth-quarter Gross Domestic Product trumped expectations of 2.5% growth on the year, with the actual result advancing by 3.0%. This caused the ‘Aussie’ (AUD) to rally versus its major peers. Gains were somewhat slowed, however, after Moody’s changed their outlook for China’s economy from stable to negative. The Reserve Bank of Australia (RBA) Governor Glenn Stevens’ dovish speech following the decision to hold the overnight cash rate is also weighing on investor confidence.
New Zealand Dollar (NZD)
Unlike its South Pacific neighbour, the New Zealand Dollar dived versus its major peers without any positive domestic data readings to stoke demand. Rising dairy prices have had minimal impact as concerns regarding China’s flagging economic growth dominate trader focus.
Canadian Dollar (CAD)
As crude oil prices decline ahead of US oil inventories data, the Canadian Dollar softened versus many of its major peers. The Moody’s report had a detrimental impact on the ‘Loonie’ as a risk-correlated asset, especially as the reduction of Asian demand for commodities is likely to weigh on prices for some time to come.