Currency Update - Thursday 31 October 2019

AUD

The first round of this week’s big data dumps has seen the Australian Dollar strengthen against the majors. Kicking things off yesterday was the Australian CPI q/q release which came in solidly on expectation at 0.5%. Headlines soon came out that Chili had cancelled the APEC summit in Santiago in November, likely to be a result of internal political pressures. Fortunately, US officials commented that the cancellation of the APEC Summit in Chile had not changed the timeframe of a potential signing of a US-China trade deal with expectations it would still be signed in November. With risk sentiment still largely preserved, the Australian Dollar has firmed across the board with positive rhetoric coming from the US Fed following their rate cut overnight and the Bank of Canada following their rate hold. The commentary coming from central banks around the world put global instability and trade tensions at the forefront of their fears over the future of their respective economies. This underlines the importance of the news that the US and China will have a preliminary deal signed in November and that the recent cancellation in Chili should not disrupt that timeline. Plenty of local data again today with local Building Approval numbers before Chinese PMIs and the Bank of Japan's monetary policy meeting.

USD

The Australian Dollar is off and running against the US this morning with a test of 0.69 following a rate cut from the US Federal Reserve overnight. As widely expected, the Federal Reserve cut its target interest rate from by 25 basis points for the third consecutive time. The message was overall hawkish compared to the last two meetings, setting a higher bar for further cuts. The only change in the statement over previous FOMC statements was the exclusion of the otherwise familiar sentence that the Fed “will act as appropriate to sustain the expansion”. This provides a slightly more hawkish tone for the statement though the FOMC did leave the door open to future cuts stating “uncertainties about the outlook remain”. Powell echoed these comments in his press conference stating that “policy is not on a pre-set course”. In other data news US GDP came in ahead of the expectation of a 1.6% print with a 1.9% reading. US also saw ADP Non-Farm Employment Change come in on expectation at 125k though markets had little reaction to the jobs data. Strong signs for the US economy all in all however the 1.9% reading was slightly down from the 2% pace in the second quarter.

EUR

We’re breaking out higher against the Euro following the first round of big data readings overnight as we edge closer to 0.62 levels. We were given a leg up thanks to a weak print of German unemployment data that saw the rate come in on expectation at 5% though also advising the number of those unemployed had risen by 6,000. This suggests that a manufacturing crisis in Europe’s largest economy is spilling over to the labour market. This will increase the calls for fiscal support and subsequently provided some deflationary pressure on the Euro. This evening we have another round of lower impact Euro data including CPI Flash Estimates and Spanish Flash GDP q/q.

GBP

The Australian Dollar has broken out higher pushing a high of 0.5352 in a surprisingly quiet day for Britain. Brexit has become a side show to the general election that has overtaken headlines in somewhat of a refreshing change to British news. Though it comes at no surprise, Brexit features heavily in the respective campaigns with the election largely divided between Boris's 'leave the EU camp' and Labour/Lib Dems who are both advocating for another referendum. Little economic news or data out of Pound Sterling this week so expect AUD/GBP to trade on sentiment.

NZD

The Australian Dollar has taken a sharp plunge against the NZD coming down from 1.082 down to 1.0768 at current market value. The antipodeans were trading sideways ahead of the FOMC decision overnight however the Kiwi has made its move up on the Aussie in the wake of a positive building consents reading this morning. Next up we’ve got ANZ Business Confidence at 11am this morning.