Foreign Exchange Rate Currency Outlook : AUD, NZD and ZAR Under Pressure as Eurozone and Australian Retail Sales Figures Cause Alarm

May 5, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Rate Currency Outlook : AUD, NZD and ZAR Under Pressure as Eurozone and Australian Retail Sales Figures Cause Alarm

The Pound Euro exchange rate (GBP EUR) is 1.1116. The Pound Dollar exchange rate (GBP USD) is 1.6519.

Yesterday’s session saw the release of a number of key pieces of economic data in the world’s major economies. For the most part this data disappointed the markets, causing the recent retraction in appetite for risk to continue.

Yesterday afternoon’s US ISM Non-Manufacturing Composite figure for April was particularly poor, printing at 52.8. The index provides an indication of general activity in the key service sector of the world’s largest economy. Analysts had expected the number to show a slight increase from it’s March level of 57.3. The drop-off does not bode well for a continuance of the US economic recovery in the second half of 2011.

April’s US employment change figure also provided cause for concern when it was released at the start of yesterday’s North American session. The number showed that only 179,000 new jobs were created in the States last month, versus analysts’ expectations of 195,000. The figure suggests that tomorrow’s key US Non-Farm Payroll number for April may confirm show that job generation is behind the curve in the States.

Meanwhile, in the Eurozone, key data provided further cause for concern. The whole-of-Eurozone Retail Sales figure for March had been expected to show that there had been no monthly change in shop sales. It actually showed that Eurozone Retail Sales had dropped by an alarming 1.7%, cooling expectations of an interest rate rise by the European Central Bank later today.

Australian Retail Sales figures for March were similarly disappointing when they were released during last night’s Asian session. They showed a monthly contraction of 0.5% in Australian shop sales against an anticipated rise of 0.5%.

The net effect of these numbers has been to significantly reduce global appetite for risk, as evidenced by the FTSE 100 closing down by 1.62% on the day yesterday. With the price of a barrel of crude oil dropping by over 2% on the session and other commodity prices also moving lower, there is a high possibility that the GBP AUD, GBP NZD and GBP ZAR exchange rates will see some upside during today’s session, even if the BoE elects to maintain UK interest rates at their current record low of 0.5%.

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