Currency Update - Friday 20th December 2019

AUD

The Australian Dollar is benefitting from stronger employment data in addition to the general
bullishness of risk assets as we finish the week on a high note. Employment
data came in at 39.9k, well ahead of the forecast of 14.5k and drastically
improving on last month’s results of -24.8k. The unemployment rate inched lower
to 5.2% (from 5.3%) while the participation rate was flat at 66%. After the
release the Australian Dollar rose across the board. It wasn’t an entirely rosy
picture however as the broader labour picture appears less positive with the
rise in employment almost entirely due to part-time hiring while full-time
employment seeing gains of only 4.2k. Therefore, we can conclude that the
labour market remains mixed and is likely unable to justify any hawkish tilt in
the RBA. No other Australian data to report to finish up the week.

USD

The Australian Dollar is testing levels close to 0.69 this morning as optimism fills the sails of risk assets
across the world. US equities had another strong performance with the S&P
and Dow Jones both up 0.3% while the NASDAQ came in the first place up .6%. US
weekly jobless claims data was weak with initial claims and continuing claims
both coming in weaker than expectations which also helped the Australian
Dollar. The Philly Fed Business Survey for December fell to 0.3, down from 10.4
and coming in well below expectations of 8.0. Released a little later, the
November leading Index was flat to fall short of expectations of +0.1% while
November Existing Home Sales fell by 1.7% to 5.35 Mio, weaker than expectations
of a 0.4% decline to 5.44 Mio. US Treasury Secretary Mnuchin said that the
phase one trade deal with China was going through a legal and technical review
and would be signed in early January. He also noted that agricultural purchases
by China would double under the agreement and that US farmers could meet
Chinese demand and that the US was prepared to work hard for phase two. A
relatively quiet day ahead to finish up the week but expect some movement in
the overnight US session with Final GDP data, Core PCE price Index, Personal
Spending and the Treasury Currency Report still to come.

EUR

The Australian Dollar is closing in on 0.62 as we open this morning to finish the week against the Euro on a
bullish note. European equities were mixed in early trade after another
uninspiring session across markets during the Asian day. There was little to
help the Euro with limited data or news to help discourage a rallying
Australian Dollar with a full head of steam after strong employment results.
Now that the dust has settled from the UK general election, and the US-China
trade deal, things are set to quiet down with little on the calendar between
now and Christmas.

GBP

The correction has finally crossed the threshold and the Australian Dollar is now trading higher against
Pound Sterling than before the UK election results came in with markets pushing
higher towards 0.53. UK retail sales didn’t help the Pound’s fate when the
results revealed a reading of -0.6% - a massive miss when the forecast of
+0.4%. In other news, the Bank of England left monetary policy on hold as
widely expected with the vote again 7-2 as Haskel and Saunders again voted for
a cut. There were however some dovish leanings in the statement with the
suggestion that rates would be cut to support the UK economy if global growth
fails to stabilise of Brexit uncertainties remained entrenched. It was also
noted that it was too early to judge the impact of the election result and
recent reduction of trade tensions while there was a modest downward revision
to Q4 growth forecasts. Expect a relatively quiet day of trading before we see
GBP Current Account, Final GDP in addition to MPC Member Haskel offering some
commentary.

NZD

There was something of a flash crash yesterday with the Australian Dollar plummeting to 1.0366 before markets stabilised around 1.04. Aussie then had a strong day of trading before the
overnight session erased those gains leaving us today at 1.0417 at the time of
writing. No other data to report to finish up the week.