Currency Update - Wednesday 6th November 2019

AUD

Yesterday the RBA left interest rates unchanged as expected, however whilst Gov Lowe’s statement maintained an easing bias, the overall tone of the document was slightly more upbeat pointing to the fact that “expectations of further monetary easing have generally been scaled back over the past month and financial market sentiment has improved a little”. This was enough for AUD to creep back towards the top of recent ranges late in the afternoon. No local data due today, tomorrow’s Trade Balance and Friday’s RBA Monetary Policy Statement still to come before the week is done.

USD

AUD remained range bound overnight, post RBA gains were reversed with general USD strength driven by higher yields and supportive data. 10 year US yields gained another 8bps which flowed through to the DXY which gained 0.5%, the main currency losers being EUR and JPY. An FT Article suggested the US was considering removing some of the tariffs on China which added to the positive sentiment and data saw the October ISM Non-Manufacturing rise to 54.7, up from 52.6 easily beating expectations of 53.5. After its peak at the 0.6930 resistance level, the AUD was driven lower although still remaining above yesterday’s lows, opening at 0.6894 this morning. Only tier 2 data pieces from the US for the rest of the week, any significant movements likely to be driven by trade-related headlines.

EUR

AUD was able to capitalise on the buoyant post-RBA mood yesterday, comfortably regaining the 0.62 handle an opening at 0.6225 this morning. No data from The Zone overnight, however the EU’s Barnier was on the wires saying that Brexit was a lose-lose situation though the EU would work towards preserving friendship, co-operation and joint ambition. He also warned that many consequences of Brexit were underestimated and that eventual negotiations for a new trade agreement would be difficult. EZ Services PMIs are due for release tonight which are again forecast to perform better than the manufacturing equivalents from earlier in the week.

GBP

AUD gains late yesterday peaked at 0.5375 before retreating back towards our opening levels today at 0.5350. UK Services PMI was perhaps the main driver for the retreat, surprising with an improved result of 50.0 (on the border of expansionary/contractionary) and ahead of expectations of 49.6. Nothing of note from the UK due tonight, however we still have the Bank of England’s meeting tomorrow night.

NZD

AUD has regained the 1.08 handle early this morning after a strong 36 hours against NZD. AUD also has the chance to run further with NZ employment data just released which showed a larger than expected uptick in the Unemployment Rate from 3.9% to 4.2%. One would think that recent highs of 1.0840 would be tested today at some point given the disappointing result. That’s it for NZD data for the rest of the week.