Currency Update - Friday 15th November 2019
AUD
Concerns surrounding the ongoing trade negotiations between China and the US have continued to diminish risk sentiment and coupled with some big data misses yesterday have produced a difficult 24 hours for the Australian Dollar. The latest Chinese economic numbers pointed to another slowdown in both industrial production and retail sales in October. This seems to suggest that the rebound we saw in September was a one off and likely fueled by an attempt to front run the imposition of new US tariffs. We also saw a big miss on Australian Employment data with a loss of 19,000 jobs despite the 16,000 new jobs expected. Officially the employment rate has risen to 5.3% for the year. Across the board we saw the Australian Dollar soften in a sea of red throughout the day.
USD
We had a harrowing day for the Aussie bulls yesterday with the Australian Dollar falling from a high of 0.6841 to a low of 0.6770 after a coalition of data came together to soften the local unit. This when coupled with the waning optimism over US-China trade negotiations produced the conditions necessary for the fall. USD CPI was first off the mark yesterday morning and come in ahead of expectations. Adding to AUD heaviness with the local Employment miss and Chinese industrial production contraction we saw heavy selling of the Australian Dollar. The miss on local employment comes at a time when RBA are reviewing monetary policy for December and while expectations remain that rates will be left on hold next month, we have seen an increased likelihood of another cut in February. US PPI for October came in at 0.4% with the core measure at 0.3% MoM, both 0.1 % higher than expected. In YoY terms, it rose 1.1% with core at 1.6%, higher than expectations by 0.2% and 0.1% respectively. Comments soon came after from Fed Vice-Chair Clarida who said that the Fed was close to achieving its twin goals. He added that there was no evidence that rising wages was causing excessive inflation and that the unemployment rate at 3.6% may not be below full employment. Retail Sales are up next for the USD which markets will absorb on Saturday morning.
EUR
The Australian Dollar had its largest fall since the beginning of October yesterday with markets currently trading at 0.6159. Amidst the data misses for the Australian Dollar was an interesting European data release. The latest German Q3 GDP numbers which came in better than anticipated seemed to weigh on market sentiment. The German economy managed to avoid a technical recession with a modest expansion of 0.1%, beating expectations of a 0.1% contraction. If anything this could be construed as a hollow victory, as it means that the likelihood of some form of a fiscal response from the German government is much less likely, thus keeping the pressure on the ECB to find new methods of trying to support the economy in Europe, which helps explain the lack of a positive market response. No other data this week to report.
GBP
The Australian Dollar went for a tumble against the Pound falling from highs of 0.5321 down to where markets are trading now at 0.5268 at time of writing. Pound Sterling had its own difficulties with a miss on UK retail sales that saw a contraction of 0.3% as opposed to the forecasted 0.2% growth. Released a little later, the EZ economy grew by 0.2% in Q2 to match the estimate. Despite this, the collection of Australian Dollar data misses was enough to produce the sharp drop off. Little other Pound Sterling news to report as the election trail dominates headlines and has given us all a reprieve from the Brexit theatre.
NZD
With the Kiwi and Australian Dollar having strong ties and sharing sensitivities to certain market conditions, the Antipodeans largely tracked each other amidst yesterday’s losses. Australian Dollar is slightly behind where we started yesterday with markets trading at 1.0635 helped by a positive reading on the Business NZ Manufacturing Index. No other data to report to finish the week.