Currency Update - Thursday 17th October 2019
AUD
Another relatively quiet day for the Australian Dollar with the biggest news coming from an obstacle that US and China have snagged themselves on in their ongoing trade war negotiations. Trump has made the initial announcement that a ‘Phase-1’ deal was in the makings which would include $40-50 billion worth of agricultural goods being bought by China in ‘less than two years’. However, China still has not confirmed a time frame or an amount for the purchases and this is just one example of the kind of the matters that need to be resolved and clarified before a deal can signed off on. Sentiment turned down slightly and we saw the immediate effects in equity markets where we saw the NASDAQ and S&P 500 both trading about 0.3% lower. Australia has Unemployment out today at 10:30am so expect some movement today as markets absorb the news. Last month's equivalent Employment figures saw an unexpected uptick in unemployment which all but assured the RBA's interest rate cut at the beginning of Oct.
USD
The Australian Dollar spent much of yesterday in decline against USD but with a big miss on USD retail sales overnight we’re back up to where we started, AUD/USD currently trading at 0.6758. Core Retail Sales came in with a 0.3% loss vs expected coming in at -0.1% vs a 0.2% expected gain. Retail Sales more broadly came in even worse with a reading of -0.3% vs a 0.3% expected gain. USD weakness quickly evaporated and the Australian Dollar enjoyed the benefits. With the ongoing China-US negotiations in full swing there is still some prevailing USD strength that is keeping the Aussie down that should be in effect until the purported Phase 1 of a deal is signed off on. Local Employment data is up next today and if that comes in strong then we should be able to continue up against the USD and potentially test 0.68 again.
EUR
The Australian Dollar is doggedly holding on after another long day giving up ground to the Euro. We dipped below 0.61 briefly but moved back up to attempt a consolidation above that level that is currently still underway. Euro was assisted by some more optimistic comments from Angela Merkel, saying that she was considering a fiscal stimulus package if growth faltered. Additionally some upbeat Brexit news has also acted to boost the Euro with EU officials commenting that all the contentious issues have been agreed upon. We’ve seen less positive comments from the UK officials but there certainly appears to be a much more positive spin on this last ditch effort to secure some kind of lasting deal between Europe and the UK. Not much european economic data out to directly impact AUD/EUR so expect Brexit news to dominate the direction of trading for the rest of the week.
GBP
The Australian Dollar opens marginally lower today at 0.527 with little movement in the last 24 hours. UK CPI for September came in weaker both Month to Month and Year on Year at 0.1% and 1.7% respectively. Both missed expectation by 0.1% though Core measure matched the Year on Year expectations of 1.7%. PPI was also down 0.1% MoM and 1.2% YoY which both missed expectations of by +0.1% and +1.3% respectively. Any gains Aussie could have made from this news however were mitigated by a much more upbeat Brexit picture with a deal that could very well be put before Parliament this weekend. UK officials were slightly less optimistic than their European counterparts commenting that the DUP’s opposition still needed to be accounted for and this could risk all the progress made thus far. The UK is quickly running out of time and the Brexit deadline is fast approaching so expect further turbulence with AUD/GBP rates as we bounce between the remaining options of Deal, No Deal and Extension.
NZD
The Australian Dollar opens slightly higher today at 1.0742 against the Kiwi, shrugging off yesterday's better-than-expected Kiwi CPI figures. Local Employment data will dominate the news today and a win there could see a re-test of the 1.08 handle.