EUR (1.202) ▲

▪ EUR reversed March’s losses and gained 2.43% against the greenback as the USD index fell by more than 2.0% (end-Apr: 91.3; end-Mar: 93.2) on the back of Fed’s dovish message and declining US Treasury yields. In addition, strong Eurozone flash PMI reading and an accelerating pace of COVID-19 vaccination in the Europe has helped to support EUR’s upward momentum.

▪ EUR may extend its gains in May on further easing of COVID-19 restrictions and a faster COVID-19 vaccine rollout in the Europe, coupled with a potential USD bearish continuation. Also, any positive progress on the EU recovery funding plan may help to further lift the bloc's currency.

GBP (1.382) ▲

▪ GBP appreciated last month, amid USD weakness and supported by the UK’s improving COVID-19 situation. Over half of Britain’s population have received at least one vaccine shot, which has led to the further relaxation of lockdown restrictions.

▪ GBP may continue to strengthen against the USD in May, as Britain’s vaccination campaign is expected to accelerate further. Nonetheless, Cable’s performance will likely depend on the Bank of England’s upcoming monetary policy meeting, as it may potentially begin reducing the pace of its bond purchases.

AUD (0.772) ▲

▪ AUD traded higher on an 11-year high consumer sentiment and upbeat jobs data, amid a weaker greenback. Lending further support was the surge in iron prices, boosted by robust demand from China.

▪ AUD is expected to remain buoyed by strong commodity prices and continued dovish rhetoric by the Fed. Nevertheless, pressure remains arising from a strained relation with CN, made worse by the cancellation of the Belt and Road deals.

NZD (0.716) ▲

▪ NZD strengthened in April, driven by higher commodity prices and pickup in trade activity on the back of global economic recovery despite rising COVID-19 cases globally. The performance also associated with weaker USD as Treasury yields dropped on dovish US Fed.

▪ NZD is expected to further appreciate against the USD this month on the back of global vaccination progress and dovish US Fed. Nonetheless, the upside would be limited due to the fears of surging COVID-19 cases and its new strain in some parts of the world.

Source: Kenanga Research - 3 May 2021