Lack of Optimism Hurts Commodity Currencies – 5th April 2016

Lack of Optimism Hurts Commodity Currencies

The sensation amongst investors is that they might not be quite as optimistic about the global economic outlook now as they had been at the end of last year. As a result, the commodity currencies were the poorest performers on Monday. The Canadian and Australian Dollars lost a cent each to Sterling, -0.5%, with the Norwegian Krone beating them by only a whisker. South Africa’s Rand fell by twice that much and the NZ Dollar brought up the rear with a loss of 1.4%.

Sterling, for a change, had a good day but as major currencies don’t make spectacular gains or losses for days on end, it was about time Sterling stopped dropping. Yesterday then Sterling managed took second place, strengthening by an average of 0.4% against the other dozen most actively-traded currencies. There was no suggestion that investors had found new enthusiasm Sterling but rather it was more a case of them being unable to justify further selling.

The US Dollar took a small step forward overnight after Chicago Federal Reserve President Charles Evans spoke of two rate increases this year. The Kiwi Dollar took a step backwards in response to a 13% fall in NZ business confidence, from 15% to 2%. The Aussie Dollar firmed when the Reserve Bank of Australia left its Cash Rate unchanged at 2%.

Today’s biggest topic will be the round of purchasing managers’ indices from the services sector. Australia opened the batting with a less-than-inspiring 49.5 but investors were more interested in what the RBA hadn’t done. All of the European and North American PMIs are forecast to be in the growth zone above 50. The UK measure is pencilled in at 54, as is one of the US readings.

Other data on today’s list cover Euroland retail sales, Canada’s and America’s balance of trade and the global dairy trade index. China’s services PMI comes out tonight.