Currency Update - Monday 14th October 2019
AUD
Global risk sentiment remained high into the weekend which opened the gates for the bulls and pushed the Aussie higher against the majors. Markets are still digesting the positive rhetoric from the ongoing trade negotiations as well as the first signs of a potential Brexit deal but as long as the positive news holds expect sentiment to remain strong. A big boost to risk appetite came from China announcing a timeline for scrapping ownership limits on financial and securities firms in a further sign that there is progress towards some sort of deal. Next up we’ve got Chinese data with trade balance first up today. There is some expectation that trade growth may remain weak off the back of slowing global growth, as evidenced by the manufacturing PMIs of the major advanced economies falling off in September. If so, be prepared for some downside risk to the Australian Dollar.
USD
The Australian Dollar had a roaring finish for the week against the USD spending all of Friday making ground and eventually breaking through 0.68 to a high of 0.6810, albeit temporarily. We open this morning at 0.6795 with the Australian dollar testing the difficult hurdle of 0.68 once more. A healthy appetite for risk has filled the sails of the Aussie Dollar driven by apparent progress between US and China. Trump tweeted out that “good things are happening at China trade talks” as media chatter abounded that a partial trade deal could soon be announced ahead of the trade meeting between Trump and Vice Premier Liu He. There was little that could seemingly help the USD with the USD Index having almost no reaction to an upbeat UoM Consumer Sentiment Index release, instead of providing its lowest reading in three weeks. Not a lot of data out today so expect Chinese trade data to be the most significant release in a day that should otherwise be ruled by sentiment.
EUR
The Australian Dollar has been fairly flat against the Euro though we do continue to slowly drift higher, opening at 0.6158 this morning. With such a strong risk on appetite risk assets often do trade fairly flat against each other while making strong gains against their risk-off counterparts. News is largely dominated by Brexit with an EU official commenting that the hope was to get a deal done by the EU Summit. Irish Taoseach Varadkar said the focus is now on Brussels and that talks may now enter a “tunnel” (uninterrupted discussions between deal teams). Europe’s Barnier also confirmed that there had been a constructive meeting with Barclay. While this doesn’t directly impact AUD/EUR, it does assist in boosting global risk sentiment which does directly impact the two currencies more broadly.
GBP
The Australian Dollar hasn’t been able to completely sweep the majors with positive Brexit movements sending the Aussie Dollar crashing down to a low of 0.5353. Australian Dollar took some ground to begin with after Donald Tusk commented that “The UK has still not come forward with a workable, realistic proposal”. However, things quickly rebounded as Tusk added a critical comment that he’s seeing “promising signals” that a deal is possible. Pound’s strength is coming purely from the markets repricing the likelihood of a no-deal Brexit that is quickly becoming less and less likely, either from an extension or a deal being reached. Time will tell but hopefully this week should provide some clarity over the future of the UK and what AUD/GBP has in store.
NZD
It’s been a bumpy ride up but the Aussie Dollar has continued to push higher against the NZD opening at 1.0729 this morning. The NZD has had few friends of late with its value diminished by both weak domestic data and dovish monetary policy and the Australian Dollar has been a big benefactor. Not much data out for the NZD in the next few days so it’ll be a technical battle over whether the Aussie Dollar can continue to push higher