Currency Update - Wednesday 20th November 2019
AUD
AUD was trading weaker after yesterday’s RBA meeting minutes, particularly in reaction to the point that a “case could be made to ease policy at the 5 Nov meeting”. However the AUD weakness didn’t last long with the recovery assisted by an article in The Australian from RBA whisperer Terry McCrann who said “The Reserve Bank did not "seriously ponder" a "shock" Cup Day rate cut — as some have interpreted, or rather misinterpreted, the minutes of that meeting”. The PBOC (China’s RBA) were also helping to extend the rally with comments that they will step up the counter-cyclical adjustment. They added that downward pressure on the economy continues and that they plan to boost banks’ ability to supply credit. Looking forward now and there isn’t much economic data of note locally, the MI Leading Index will drop at 10.30am today but shouldn’t pressure the AUD into any sharp moves.
USD
Yesterday AUD rallied off the post-RBA-minutes low to regain the 0.68 handle before pushing on to 0.6835 highs, opening this morning just shy at 0.6826. Driving the move were stimulatory comments from PBOC but also positive US/China trade headlines that the US and China were said to tie tariff relief to the failed deal from May, this implying that if China agreed to the deal from May the US would reduce tariffs potentially back to the May levels. Trump soon on the wires saying that China was going to have to make a deal, adding that he was happy with negotiations and if there isn’t a deal he would increase tariffs even further. To the data, and US Building Permits solidly beat expectations (1.46m vs 1.39m exp) and Fed Member Williams said that the US economy is in a good place and the Fed was close to achieving its sustained inflation goal. Tonight we get the FOMC Meeting Minutes (the US equivalent of yesterday’s RBA meeting minutes) which could provide an insight into the path for US rates moving forward. Worth noting AUD didn’t spend long below the 0.68 level, murmurs of an AUD bottom and slow rally back towards 0.70 are circulating.
EUR
AUDEUR traded in line with AUDUSD overnight, dipping during yesterday’s trade before rallying overnight, settling this morning at 0.6161. This is an example of why Australian businesses can benefit from overnight market orders – often the peaks/troughs occur in the overnight sessions when the larger trading flows persist. The moves were all a result of forces outside of the EZ as described above and tonight we only have low impact European data before tomorrow night’s ECB Monetary Policy Meeting Accounts.
GBP
A familiar story here, AUD opening slightly higher at 0.5280 this morning, having rallied off yesterday’s intra-day lows. In the absence of meaningful economic data from the UK all week, currency is trading here in reaction to UK election headlines which of course will dictate how the Brexit endgame will play out in January.
NZD
A tight battle persists, AUD and NZD sensitive to the same forces affecting currencies in the last 24. NZD has edged slightly ahead, with the cross trading at 1.0612 at time of writing. This morning’s milk Price Auction showed only a modest increase in milk prices (1.7% vs previous 3.7%). Little in the way of data for the rest of the week here, sharp moves in AUDNZD unlikely.