NZ business confidence in negative territory
A sharp drop in New Zealand Business Confidence was reported overnight. The index, published by ANZ, showed a minus 4.1 reading in March, compared to a plus 7 reading in February. That negative effect was counterbalanced by improvements in China’s manufacturing and composite purchasing managers indices. China is New Zealand’s number two export market. The GBPNZD rate is moving up and down within a tight range, just below NZD 1.97.
Across the Tasman Sea, Australian private home approvals were up 15.1% in March, when the markets generally believed we would see a 12% contraction. This data is notoriously hard to predict, which probably explains why the GBPAUD exchange rate is down half a cent on the overnight highs but still above AUD 1.80. The short-term trend in this pair is upward.
Q1 to finish with a flurry
Part of that upward movement is this morning’s release of better-than-expected GDP data for Q$. The quarterly growth figure was revised up from 1.0% to 1.3%, and that brought the annualised contraction down to minus 7.3%, half a percentage point better than forecast. That has allowed the pound to push above EUR 1.17 again and has supported the Pound above USD 1.37.
EURUSD on downward slope
From the eurozone this morning, we will see inflation and retail data from several member states and the overall inflation figure for the Eurozone bloc, which is forecast to be comfortably higher than the February 0.9% figure. Certainly not enough to herald any early ECB rate hikes but enough to support the Euro. And it needs support. The EURUSD rate is still in decline, the target being $1.1620, I suspect. That was the low we saw in September and November 2020. If this pair falls below there, the picture changes considerably and much lower targets loom into view.
This afternoon brings Canada’s GDP data. Like the UK data, we expect improvement; month on month growth of 0.5% would satisfy the forecasters. So anything other than that will shunt the Canadian Dollar around. At the moment, the GBPCAD rate is finding a surfeit of GBP buyers at the CAD 1.73 level. If that doesn’t hold, 1.72 is the first target.
The afternoon session also brings a swathe of oil market data; the US stockpile data is the key ingredient. We will also see US pending home sales, something the Fed watches closely for signs of strength or weakness in the US consumer sector. People don’t buy houses unless they are reasonably confident of their finances.
UK GDP grew faster than forecast in Q4
These factors are influential, but we also have to consider that this is the last day of the month of the Quarter and the financial year-end for many companies in the US and UK. That can trigger the opening and closing of substantial foreign exchange hedges, pushing exchange rates around in their wake. So we ought to expect volatility and opportunity in equal measure.