Currency Update - Friday 13th December 2019

AUD

The Australian Dollar is the benefactor of boosted risk sentiment following renewed optimism over the US-China trade deal after President Trump tweeted they were “very close” to a deal. While this may be inducing some feelings of déjà vu this is the first time we’re seeing President Trump tweeting out optimistically regarding the deal since we entered the final week of negotiations ahead of the deadline. With new tariffs scheduled to be imposed on the 15th unless a trade deal can be made, the recent radio silence has weighed heavily on risk assets with traders moving their positions into safe havens. The reason being that if the trade deal falls apart risk assets, such as the Australian Dollar, are among the first causalities of such an event. We have an extremely light day of data releases today so expect the UK election to dominate the headlines, a Boris win should see AUD upside.

USD

With renewed optimism filling the sails of the Australian Dollar we’ve broken out higher above the
0.69 handle. Trump’s promises that a “BIG DEAL” with China was getting very close reassured traders and has given equities a significant boost as well. The optimism is being driven by hopes that the tariffs for the 15th of December may well be deferred and given the fiery rhetoric we’ve seen define Trump’s presidency; he’ll need an excuse to defer tariffs. What we expect then is the US to provide some compromise to China in order to get something across the line for Trump to justify his decision to defer. We have seen reports that US negotiators are looking for a 50% cut in tariffs on $360bn of Chinese imports. On the data front we’ve seen US PPI with a bad miss, missing a 0.2%+ forecast with a -0.2% reading. Unemployment claims didn’t help the USD either with Unemployment Claims growing to 252k ahead of expectations of 213k.

EUR

Rising sentiment has helped the Australian Dollar which has moved up above the 0.62 handle where it is currently attempting to consolidate. Euro remained largely unchanged after the ECB left monetary policy on hold as was widely expected and the accompanying statement and first for new president Christine Lagarde offered little new information either.  Lagarde was initially a little hawkish in saying that there were signs of stabilization in growth and incoming data had confirmed this and that while risks remained to the downside, they were less pronounced.  There were modest revisions to growth and inflation forecasts and she indicated there some “indications of a mild increase” in inflation though forecasts out 3 years remained under target. Ahead today a very quiet day of data so expect AUD/EUR to trade largely on sentiment and off UK election results.

GBP

Polling for the UK election is over and the historically accurate exit poll has pointed to a landslide Tory victory. The Australian Dollar is being punished as a consequence of the poll that just came out at time of writing with markets trading AUD/GBP close to 0.5150. It is important to note that while the exit poll is again, just a poll, the election results still need to be counted and Boris still needs to secure his majority. No other data to report this morning on Pound Sterling.

NZD

The Australian Dollar has started to lift against the Kiwi with markets trading at 1.0481 at time of writing. The Business NZ Manufacturing Index came in with a weaker result than previous with a reading of 51.4 which weighed the Kiwi down. No other data ahead today.