Currency Update - Wednesday 30th October 2019
AUD
The Australian Dollar and other risk assets are in a holding pattern ahead of a plethora of events over the next 48 hours. First up we’ve got Q3 CPI numbers for the Australian Dollar that is currently forecasted at a modest 0.4% q/q and a 1.5% y/y as per Macquarie Bank. Inflation is typically seasonally strong in Q3, with the effect of seasonal adjustment is to subtract -1/4 ppt from quarterly inflation on average over the past decade. Governor Lowe also spoke last night but offered little new information and correspondingly we saw little impact on currency markets. CPI is set to release at 11:30am today so expect the flat trading to continue until then.
USD
The Australian Dollar has pushed higher against the USD ahead of today’s inflation data testing as high as 0.6871. We’re approaching the top of the trading range that has a ceiling around 0.69 that could be tested again if we see a strong CPI reading this morning. News coming from the US-China negotiations is that while a trade deal may not be signed in Chile ‘progress was being made’. This has helped preserve the recent optimism risk assets as the AUD have enjoyed recently. Outside of CPI this morning at 11:15pm tonight we’ve got ADP Non-Farm Employment Change then at 11:30pm we’ve got Advance GDP quarter to quarter. Big day for both Australian and USD data so prepare for turbulence if the US has a strong Employment reading that could increase the risk of a no-cut decision out of the US Fed. The rate cut decision is tomorrow 5am and is currently priced in at a 90% chance of a cut that markets have largely baked in.
EUR
The Australian Dollar continues to advance on the Euro reaching 4-week highs while markets currently trade at 0.6176. Spanish retail sales beat expectations growing by an annual rate of 3.4% (3.2% expected) with French consumer confidence coming in at 104 as a forecast. Following the EU granting an extension to the UK a general election has been called for December that helped maintain a more positive risk sentiment. Outside of the Brexit update news from the Eurozone is quiet today.
GBP
News of a UK general election on the 12th of December has given a small knock to the otherwise rising Australian Dollar as markets open this morning at 0.5333. The Conservatives are polling well ahead of the Labour but traders have learned not to rely on opinion polls given the events of the past three years, hence why equities are down. Last month UK mortgage lending was £3.84b, which was in line with forecasts. The August report was revised down to £3.7 billion from £3.85 billion, which was in line with forecasts. The number of mortgages approved was 65,191 which was a slight improvement in the August reading, so demand is clearly holding up.
NZD
The Australian Dollar has broken out higher against the Kiwi Dollar testing highs of 1.080. We’ve come off the highs but appear to be consolidating. There has not been a deal out there to serve as a catalyst for the Australian Dollar to break through the 1.080 ceilings so prepare for downside risk if the Australian Dollar fails to consolidate higher than the breakout level.