Euro Weakens with Disappointing German Inflation, New Zealand Dollar Edges Higher after RBNZ Held Rates

Published: 28 Apr at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Germany, Greece,

Pound Sterling
Despite an unimpressive dip in the Nationwide House Price survey the Pound strengthened against some of the majors on Thursday, although it remained in a slump against its commodity-correlated rivals. While the UK housing market showed fresh signs of slowing and a group of eight economists voiced their support for the country to vote to leave the EU the mood towards Sterling was somewhat improved. A recent increase in optimism regarding the outcome of the June referendum has continued to support the currency, although ‘Brexit’ fears remain a downside risk.

Euro
Confidence in the single currency took a sharp blow when the German Consumer Price Index was found to have slipped back from 0.3% to 0.1% in April. This renewed weakening in domestic inflationary pressure does not appear to bode well for Friday’s Eurozone CPI, and encourages the likelihood of the European Central Bank (ECB) implementing further loosening measures. With the Greek debt crisis also showing signs of reigniting the outlook for the currency union is not especially positive at present.

US Dollar
Following the Federal Open Market Committee’s (FOMC) decision to leave interest rates unchanged overnight the ‘Greenback’ fell largely out of favour with investors. Although policymakers did leave the door open for a possible rate hike in June the odds of imminent tightening were diminished by the first quarter US GDP report. With the world’s largest economy slowing more sharply than anticipated there was little reason to buy into the softened US Dollar on Thursday.

Australian Dollar
Improved market risk appetite helped to shore up the ‘Aussie’ following its marked slump on the back of Wednesday’s poor inflation data. While the Australian Import and Export Price Indexes also proved disappointing this was not enough to prevent the antipodean currency enjoying a modest resurgence. Nevertheless, sentiment towards the Australian Dollar is likely to remain weak as the odds of a Reserve Bank of Australia (RBA) rate cut have increased.

New Zealand Dollar
Investors were generally relieved to find that the Reserve Bank of New Zealand (RBNZ) had opted not to cut interest rates at this time. As a result the ‘Kiwi’ trended higher across the board, recouping losses made as markets had hedged bets against the central bank slashing rates overnight. With policymakers maintaining a dovish bias, however, these gains could prove to be relatively short-lived.

Canadian Dollar
The Department of Energy’s US crude oil inventories showed a larger-than-expected increase in stockpiles over the last week, prompting the price of oil to lose some of its recent upwards momentum. Consequently the ‘Loonie’ softened against rivals, in spite of a general improvement in market risk appetite. Friday’s Canadian GDP results could see the Canadian Dollar climb higher, however, with expectations of an uptick in growth.

As of Thursday, 28th April 2016, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.2867, GBP USD exchange rate was 1.4608, GBP AUD exchange rate was 1.9154, GBP NZD exchange rate was 2.0989, and GBP CAD exchange rate was 1.834.

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