Currency Update - Thursday 12th December 2019
AUD
A quiet day yesterday with limited data for the Australian Dollar, however the overnight session was a different story. All eyes were on the FOMC decision that kept rates in the US on hold as expected but was enough to soften the USD to allow an AUD rally. One of the few moderate impact releases yesterday was the Westpac Consumer Sentiment Index that confirmed that consumer sentiment is still falling. Since the RBA started cutting the cash rate in June this reading is down 1.9%. Ahead today there’s little Australian news or data so expect the AUD to trade against the overseas news, in particular the ECB and the UK election tonight.
USD
The FOMC held rates steady as expected overnight and surprisingly the USD softened resulting in the Australian Dollar testing close to 0.69. US inflation data also came out last night with the highest CPI reading in a year. Inflation now at 2.1%, ahead of the FOMC’s target of 2% so the FOMC decision to keep rates on hold was not unexpected. The Fed will be monitoring the data, which has been broadly positive recently, and seeing as we haven’t seen the effect of the three rate cuts that took place between June and October, we may see the US Fed keep their policy in check for the foreseeable future. A quiet day ahead on the data front with all eyes now turning to the ECB monetary decision this evening and the UK election.
EUR
The Australian Dollar attempted a breakout testing familiar levels close to 0.62 to top off a strong day of trading against the Euro. The US-China trade situation is still at the forefront of traders' minds and the lack of clarity is impacting equity markets in Europe and pushing Euro lower. Rates are expected to be left unchanged later this evening when the ECB and SNB make their monetary decision. This decision shall be paid extra scrutiny as it is the first meeting for the new President Christine Lagarde. We’ll be especially interested since Lagarde has been notoriously tight lipped about monetary policy since taking the job and now Lagarde will need to weigh in on the monetary situation in Europe in an official capacity. No other significant data to report today.
GBP
Pound Sterling has weakened against the Australian Dollar in the leadup to the UK election as polls narrow, with markets trading at 0.5211 at time of writing. The latest UK opinion poll showed that Boris Johnson’s projected majority had narrowed to just 28 seats, down from 68 seats when the same poll was conducted two weeks earlier. Sterling remained on offer off the back of it and helped Aussie push higher. While the polls have largely been in the Tories' favour it is important to note the lack of reliability with polling in recent years. With markets taking the view that a Tory victory will be good for Pound Sterling and conversely a Labour victory a poor one, expect significant Aussie upside if Jeremy gets across the line.
NZD
An extremely quiet day on the data front has led to the Australian Dollar creeping marginally higher against Kiwi with markets trading at 1.044. AUD/NZD is largely moving sideways in the absence of news and we can expect this to continue as traders exercise caution with so many major events set to release in the next 24 hours.