Currency Update - Wednesday 16th October 2019
AUD
A quiet day yesterday for the Australian Dollar which appears to be fluctuating primarily in reaction to trade news from China and the US. Chinese new bank loans rose to 1.69 trillion Yuan ahead of forecast as policy makers ramp up efforts to stabilise the cooling economy. Chinese regulators have been trying to boost bank lending and lower corporate financing costs for over a year however there appears so far to be no stopping the economic slowdown. Analysts have commented that the problem is not a shortage of liquidity or credit but souring business confidence off the back of weaker sales and profits that ultimately stem from the US-China trade war. Up next we have Employment data tomorrow but otherwise expect a fairly tight trading range for the Australian Dollar across the majors in the absence of any major news.
USD
The Australian Dollar spent most of yesterday drifting lower against the USD as the greenback firmed up and we open this morning at 0.6754. A Brexit deal may be on the table and the USD was a benefactor which saw heavy buying pressure on the USD after the latest Brexit news broke. We do have some support at 0.6750 and the market is currently trading between the 50 and 100 day SMA (simple moving average) which can often suggest a sideways market in the short to medium term. Today should be a relatively quiet day for the Aussie without any data releases or news set in the calendar so expect a fairly tight range of trading as we lead up to USD Retail Sales this evening at 10:30pm.
EUR
The Australian Dollar has continued yestarday's bearish run as we open today at 0.6121 against the Euro. Some poor European data in the form of the German ZEW survey printed overnight at -25.3, down from -19.9 and worse than expectations of -23.6 though this has been of little help to the Aussie Dollar as it continued its downward trajectory. The primary news came from Brexit with reports coming in that UK and EU negotiations had made a breakthrough and a deal is on the table however it would require DUP support. Not much to report on as we continue to trade in a fairly tight range against the Euro and wait for more substantive updates to provide some insight on where AUD/EUR is heading next
GBP
The holding pattern against Pound Sterling is over as the Australian takes another plunge, opening this morning at 0.5287. The plunge, coming from the big Brexit update, is the third this week and could be a sign of more to come if a Brexit deal does indeed materialize. Of course, the biggest hurdle for any Brexit deal will be its ability to succeed in British Parliament which at this point seems difficult. Irish PM weighed in commenting that while progress has been made, the gap still left to cross was “still quite wide” especially on customs. EU officials also weighed in commenting that headlines were “way too premature”. With a general election looming for the Johnson government the political aspect of Brexit cannot be ignored. With the 31st coming up fast we can expect the Aussie to have significant downside risk if indeed the deal makes more progress though this of course can unravel quickly.
NZD
The Kiwi has taken a chunk out of the Australian’s Dollar's recent run up this morning after CPI came out ahead of expectation sending AUD/NZD to a low of 1.0686. With an official print of 0.7% ahead of 0.6% it comes as welcome news for the Kiwis and the RBNZ. The Aussie Dollar is already working its way back up as markets attempt to stabilize the news and we currently trade at 1.0711.