Currency Update - Monday 16th December 2019
AUD
Markets were well supported on Friday and into the weekend, the AUD briefly spending some time in the rarified air above 0.69 vs USD with a boost from a convincing UK election result and a trade resolution of sorts between US and China. On the trade deal, and senior Chinese officials held a press conference on Saturday confirming a trade deal had been reached. They said this was a major achievement, was consistent with Chinese goals of reform and would boost global confidence. They also said that additional tariffs would not be imposed by either side and that the US would reduce already imposed tariffs on a phased basis. Trump then confirmed that December 15 tariffs would not be imposed though existing tariffs at 25% would remain as they are. Chinese officials not denying this as their press conference concluded while also not confirming the amount of agricultural purchases in the agreement. Looking ahead after an eventful end to the week and the local story is still centered around China, with Industrial Production numbers due for release at 1pm (these are an important leading indicator for demand for Aussie resources). On Thursday we’ll also have the local employment report in what will be the highlight of the local economic calendar.
USD
AUD enjoyed a rollercoaster ride on Friday, peaking at 0.6939 for fresh 5-month highs before running out of steam and settling back below 0.69, opening at 0.6873 this morning. The US/China trade tensions de-escalated before the Sunday deadline at which new tariffs were due to be implemented, China agreeing to an unspecified amount of purchases from the US in return for a reprieve on the new tariffs. Considering how much importance have been placed on the deal, the details seem relatively vague and risk hasn’t received as much of a boost as it could have. More details of the deal are likely to come to hand in coming days. Still on trade and focus immediately moved to Europe, with a press report saying that Trump was considering 100% tariffs on additional European goods. To the data and US Retail Sales numbers showed a contraction and were worse than expectations although this was overshadowed by the trade story. Tonight the data continues with Flash Manufacturing PMI. Support for AUD sitting at 0.6850 and AUD looks uncomfortable above 0.69 for now.
EUR
AUD opens this morning lower at 0.6180 after a busy close to the week. AUD lost ground against EUR on the UK election result and then further ground as risk missed a trick with the ambiguous US/China trade deal. It all didn’t go the way of the EUR however, with the potential for new US tariffs on Europe presenting concerns for investors. Plenty of data tonight with Services and Manufacturing PMIs from France, Germany and The Zone as a whole.
GBP
Boris enjoyed an emphatic win in the UK election on Friday, AUDGBP losing over 1 full cent as the result became clear. AUD opens this morning only slightly off the post-election lows at 0.5157. The story will now move to Boris’ promise of a fast Brexit deal which markets are expecting to be done and dusted by mid-January, a result that would likely see further GBP strength. There’s no let up tonight with UK Services and manufacturing PMIs due for release, followed by Bank Stress Test Results.
NZD
AUD finished the week in the same fashion as the majority of last month; firmly on the back foot. Whilst both the antipodeans traded similarly against the majors in the face of the trade deal and UK election, NZD continued to dominate the trans-Tasman battle, perhaps the potential RBA interest rate cut in February is proving the deciding factor. 1.0419 at time of writing, no Kiwi data due today.