UK MANUFACTURING SENTIMENT IMPROVES PUSHING THE POUND HIGHER
The Australian dollar rose against the US dollar after the Reserve Bank of Australia left interest rates unchanged, as expected, at 1.5%. In the accompanying statement, officials projected that the rate of inflation would reach the 2% target this year. This will likely lead to the start of rate hikes. However, officials were still concerned about the falling prices of real estate in the key cities of Sydney and Melbourne. Year to date, the Australian dollar is lower than the USD by about 2.5%.
The pound was higher than the dollar following better than expected manufacturing data. Data from the Office of National Statistics showed that the sentiment on manufacturing rose to 55.1 in March. This was higher than February’s number of 55.0 and the expected 54.8. The improved sentiment is a good thing for a county that is going through the challenge of Brexit. It is also an indicator that manufacturers were optimistic about the direction of the negotiations.
The euro was little moved against the dollar after Germany released its manufacturing PMI that missed analysts’ forecast. The official data showed that the manufacturing sentiment in the largest economy in Europe declined to 58.2 from last month’s 58.4. Analysts were expecting the data to show that the sentiment remained unchanged. This data is a reflection of the ongoing concerns from manufacturers that the impasse on trade would significantly affect their businesses. Germany derives most of its income from the export of various manufactured products like cars and pharmaceutical products.
Meanwhile, a report published by Reuters indicated that the Trump administration was prepared to push for the initial NAFTA deal. This was unexpected at this time because in the past, Trump has vowed to do away with the Free Trade Agreement. In the weekend, he suggested that his immigration policies be included in the deal. As a result, the Canadian dollar and the Mexican peso were higher against the US dollar.
Yesterday, the pair rose as traders waited for UK’s manufacturing data. These gains were wiped in early trading today when the pair fell to an intraday low of 1.4026. Following the manufacturing data released today, the pair made some gains, rising to the current 1.4050. The double simple moving average chart shows that the pair could continue moving higher. However, traders need to be cautious about the US employment data set to be released tomorrow by private firm ADP.
The EUR/USD pair started the day by moving to an intraday high of 1.2345 following reports that Donald Trump was prepared to push for an initial NAFTA agreement. However, the pair wiped away the gains after the disappointing data from Germany. The pair is now trading at 1.2350, which is slightly higher than the day’s low of 1.2281. The MACD and the Parabolic SAR indicators show that the pair could continue moving higher as we wait for tomorrow’s unofficial employment numbers. Traders should watch out for the important 1.2300 level.
After the RBA interest rate decision, the pair moved to a high of 0.7706, a level it reached a week ago. The pair has now given up some of those gains as traders took profit. It is now trying to test the upper Bollinger Band™ line, while the MACD shows that the pair could see a slight drop. Nonetheless, the hawkish language used by the RBA officials could help the AUD gain against the US dollar. Traders should watch out for the weekly high of 0.7760, which could be the next target.