Currency Update - Friday 25th October 2019

AUD

Another quiet day for the Australian Dollar with little changes to the cautiously optimistic sentiment that has produced mixed results for the Australian of late. Looking to other comparable risk assets we saw the NASDAQ gain 0.7% overnight while the S&P and Dow were flat. Trading was muted leading up to the ECB meeting which provided little impact to currency markets though the Antipodeans logged some mild losses against the majors. There were somewhat inflammatory comments issued by Vice President Pence who was highly critical on China’s record on trade, human rights and religious freedom. From a strictly currency perspective these comments provided a minor negative effect on risk sentiment. Little else to report on what is a quiet week. Moving forward we may have to rely on the news to provide some direction for currency markets as we’ll be waiting until Wednesday for any major data releases.

USD

The Australian Dollar continues to move down from highs of 0.6880 seen earlier in the week and markets currently trade at 0.6819. In the absence of significant news and data sentiment became slightly more sensitive as traders looked for direction. The bulls would be disappointed after Vice President Pence made some inflammatory comments about China going so far as to publicly declare a message to Hong Kong: “We stand with you”. He did offer the odd olive branch and say that the Trump administration was not seeking to de-couple from China. US Durable goods fell by 1.1% in September, which undershot the 0.8% forecast. The report points to a more fragile consumer climate, which doesn’t bode well for the economic outlook as consumer spending is vital to keep the economy moving. Despite this, the USD is broadly higher and we can expect the Australian Dollar to float between 0.68 and 0.6880 for the next few days of trading.

EUR

Another day of sideways movement for the Australian against the Euro as we open this morning at 0.6139. All eyes were on the ECB and Mario Draghi’s final press conference though the update didn’t highlight anything new. The central banker cautioned that risks to the economic outlook remain on the side, and that headline inflation is likely to decline further. Earlier this morning, the French manufacturing as well as the services PMI report showed slight improvements in the month. The German manufacturing reading pulled back from the decade-low level, but the services update showed expansion at a slower rate.

GBP

The Australian Dollar is trending slightly lower from yesterday’s highs of 0.5337 as markets currently trade just above 0.53. Traders are content to twiddle their thumbs in the Brexit waiting room as there is a belief in the markets the EU will grant the UK an extension in regards to leaving the trading bloc. It is clear that both parties want a deal, but it might entail some more waiting around. Ultimately the bids will continue to come in for Pound Sterling until we see a significant Brexit update in the form of an EU extension or rejection. A rejection of an extension from the EU at this point would be catastrophic to the Pound’s valuation given the recent bullish run the Pound has been on as a no-deal Brexit becomes less and less likely. This is an unlikely outcome to seriously consider so for now expect continues sideways movement for AUD/GBP until news comes in from the EU.

NZD

We’re slightly lower against the Kiwi coming off of 1.069 highs down to 1.0680 on a fairly flat day of trading. There’s little news to report on as the Australian appears to have found some consolidation after the second half of October has seen the Australian Dollar give up much of the gains made in the first half of the month