Currency Update - Friday 11th October 2019

AUD

The Australian Dollar has benefited from a renewed sense of optimism in markets with both positive updates in the Brexit negotiations and some positive reports from the ongoing China/USD trade talks. Driven by reports that US and China were close on a partial deal that includes terms regarding the Yuan valuation in exchange for a suspension of US tariffs, we’ve seen the appetite for risk come back into markets. Risk assets such as equities and the Australian dollar both benefitted. Moving forward there isn’t anymore AUD or CNY data coming out today so expect the Aussie to remain fairly range bound.

USD

The Australian Dollar has put together back to back days of running up on the greenback with the Aussie Dollar reaching a high of 0.6774. Largely driven by renewed trade optimism between both China and the US and the UK and Europe the Aussie has attempted to break out higher against the recent AUD/USD trading range. Assisting the Aussie’s ascent was a miss on US CPI for September that came in flat month to month and +1.7% year on year, both missing expectations by 0.1%. Weekly jobless claims were also released with mixed results. The miss on CPI will increase the pressure on the US Fed to cut rates and this has helped with the US weakness.

EUR

There’s been little reaction to the recent developments between US-China and the EU-UK between the Australian Dollar and the Euro. Both being risk assets benefitted more broadly across the majors and across the indexes however there’s been little move with the Australian Dollar trading at around 0.6140. In early European trade the German trade surplus came in at a lower than expected 16.2b with falling exports cited for the miss. Despite the miss it did little to impact AUD/EUR with the Aussie edging marginally higher. The ECB Minutes showed that all policy makers agreed on the need for further easing with a very large majority in favour of a 10 basis point cut, a clear majority in favour of QE and a majority supporting tiered rates though some reservations were expressed.

GBP

The Australian Dollar has taken a shocking knock against Sterling following a positive update between the UK and the EU which saw the Aussie plunge from 0.5531 down a full cent to 0.5430. Aiding the plunge was a strong UK GDP posting in the 3 months of June to August. However the real driver was what transpired between the UK and Irishi PM’s who advised that a deal was in everyone’s interest and there existed a pathway to a deal. Moreover, reports came in of a meeting between Varadkar and Johnson and the meeting went well enough to justify renewed optimism. Time will tell whether Boris will be forced into requesting another extension or if a deal with the EU is truly possible.

NZD

Aussie has edged higher against the Kiwi coming up to 1.0758 before coming back down to 1.0689 as the Aussie and Kiwi continue to trade fairly flatly. The Australian Dollar seemed to benefit more from the improved sentiment with the Kiwi still trying to shake off some recent domestic data misses. No data out today to push Aussie/Kiwi in either direction in any significant sense.