Currency Update - Wednesday 13th November 2019
AUD
The narrow trading rages to start the week are set to expand, significant data events due over the next 48 hours likely to increase trading activity. Yesterday’s business confidence numbers showed some improvement on the prior month although still remain low, AUD unmoved by the data. Today’s Wage Price Index begins an important 24 hours for employment data, complemented by tomorrow’s Employment Change and the Unemployment Rate. As we know, the RBA is targeting a sub 5% unemployment rate which it says will put upward pressure on wage prices and translate into more economic activity, finally resulting in higher inflation. So will last month’s surprise reduction in the unemployment rate help today’s wage growth number? With wider trading ranges expected over coming days, market orders are a good way to collect some of the added volatility. Also watching closely the situation in Hong Kong which seems to have escalated, any direct Chinese intervention with boots on the ground would likely see heavy AUD selling.
USD
The US returned from Veterans’ Day with a lazy economic calendar, AUD slipping only slightly to this morning’s 0.6840 level. Trump’s speech was the highlight overnight; he commented on how strong the US economy was under his leadership after a period of stagnation in the Obama administration before taking aim at the usual targets. He said the Fed was far too slow in cutting rates and put the US at a disadvantage to other countries and called for negative rates. On trade he accused China of using their developing nation status at the WTO to take advantage of the US, said they manipulate their currency and desperately wanted a trade deal, noting phase one could be signed soon though only if it was advantageous to the US. He also accused the EU of having set up “terrible” trade barriers for US products which were “in some ways worse than China” though he made no mention of whether auto tariffs would be imposed on the EU. Tonight the data shifts into gear with CPI as well as a speech from Fed Chair Powell.
EUR
AUD marginally stronger against EUR this morning at 0.6213, benefitting from EURUSD losses in the absence significant economic data. European equites opened in positive territory with car makers doing well on expectations that Trump will delay any decision surrounding tariffs on automakers for another 6 months. Little in the way of economic data tonight.
GBP
AUD opens basically unchanged after mixed UK employment data overnight. Unemployment claims increased, however the Unemployment Rate improved to 3.8% (one of the lowest amongst G10 economies). Wages growth disappointed, slowing to 3.6%. The data continues tonight with CPI due around 8.30pm.
NZD
NZD lost ground yesterday after Inflation Expectations q/q showed a slight reduction, AUD quickly gaining 40 bps to reclaim the 1.08 handle, trading at 1.0804 at time of writing. The RBNZ is in action today, odds are in favour of another 25 bps cut however it’s not a certain thing. The RBNZ won’t meet again until February, we’re in favor of a cut which would see AUD improve. There will be movement here one way or the other at 12pm Sydney time.