Currency Update - Thursday 7th November 2019
AUD
Risk sentiment has taken a turn for the worse after the ongoing China/US trade negotiations hit a snag overnight with reports that any signing could be delayed until December. With that said, further headlines have suggested that a deal is more likely than not, given the risks still involved for the two parties forming an agreement. Cautious optimism remains intact however reports like this can have short term implications for currency markets. No other news or data to report outside of a moderate impact release of Australia’s trade balance this morning at 11:30am.
USD
The Australian Dollar has reacted to the delay in China-US negotiations moving lower before finding support around 0.6877. US equity markets were relatively stable despite the tensions while 10 year bond yields fell 5bps after three strong sessions. Trump administration officials have backpedaled on their claims that a deal with China would be signed in November, advising that a delay is likely while downplaying fears that the Chinese push for the removal of tariffs had not derailed progress. On the US economy, Fed member Evans said that policy was now accommodative with a third rate cut and that he believed the neutral rate had moved lower. He also said that he was comfortable with inflation at 2.5% to sustainably hit the inflation target. On the data front we had some minor impact news with US Q3 Nonfarm Productivity fell by 0.3%, falling well short of expectations of a 0.9% gain. Unit Labour Costs however rose by 3.6% to easily beat expectations of an increase of 2.3%. Markets had little reaction to the data. No meaningful economic data from the US tonight.
EUR
The Aussie Dollar has shrugged off US-China delays to consolidate above the 0.62 handle, currently trading at 0.6219. On the data front, German factory orders were released in early European trade with the 1.3% jump in September better than the 0.1% rise that was expected. Equities were mixed in early trade after similar results for Asian stocks. The final service PMI numbers for October were also released with Spain first off the mark coming in with a miss of 52.7, slightly below forecast. There was better news from Italy with the reading of 52.2 above the estimate of 51.0. France matched the flash reading at 52.9 with Germany improving to 51.6 vs the initial reading of 51.2. The EZ reading improved to 52.2 from the flash reading of 51.8. Finally EZ retail sales grew by 0.1% in September with some revisions meaning the annual rate improved to 3.1% ahead of the 2.4% expectation. Tonight the EU Economic Forecasts take center stage around 9pm.
GBP
The Australian Dollar has continued sideways against the Pound as traders analyse the polls and election promises for Brexit related implications. Predictably taking the spotlight was Boris who took to the wires to proclaim that he would get Brexit done in January and that 2020 would be a year of “investment and growth”. News made little impact on markets and in the absence of any other data and news, expect the AUD to trade sideways for the rest of the day. Looking ahead to this evening we’ve got an interest rate decision from the Bank of England, though it is widely predicted that the BoE will keep rates on hold on account of the upcoming general election.
NZD
The Australian Dollar's most recent rally against NZD has come off the boil somewhat falling overnight to a low of just below 1.08 before the Australian Dollar consolidated slightly higher. Little news or data to report from NZ, so looking ahead we’ve got tomorrow's RBA Monetary Policy Statement to potentially bump us around.