Currency Update - Thursday 19th December 2019

AUD

In what is the final week for most workers this holiday season the markets are fairly quiet with
relatively tight trading ranges for the Australian Dollar against the majors.
Sentiment generally remains fairly upbeat with the effects of phase one of the US-China
trade deal helping to encourage markets. There was no local data to report
yesterday however today's employment data due at 11.30am has the potential to
bump the local unit around. The employment data will carry extra weight today
given the RBA's message earlier this week that their next meeting in February
is indeed 'live' and data dependent. As we know, labor market performance
is one of the key factors the RBA weighs up when considering interest rates

USD

Market sentiment remains generally strong, however a lack of
data has led the Australian Dollar to trade extremely flat against the US, with
markets currently trading at 0.6854 – almost exactly where we 24 hours ago. US
equities remain extremely strong with the S&P 500 posting yet another all-time
high. On the data front the US remains quiet with the only source of
significant news coming overnight with Crude Oil Inventories coming in with a
big miss -1.1M which works out to be 35,000 barrels per day less than was
forecasted. Little other data ahead so expect a relatively subdued day of
trading unless we have any big surprises in Australian unemployment data at
11.30am.

EUR

AUD crept slightly higher against the Euro overnight as markets
open at 0.6167 this morning. There are some no-deal Brexit jitters that are
doing the rounds in markets today and this has helped the bids on the Aussie
win out. On the data front, a German IFO Business Climate survey came out
yesterday with a mild improvement over the expected results which is a useful
indicator that perhaps the manufacturing crisis in Europe’s largest economy
could be bottoming out. The ECB’s Coeure said that the Central Bank could
indicate the tolerance band for inflation but that this would not be an
invitation for inaction or complacency. Quiet day for the Euro ahead on the
data front so expect more sideways movement for AUD/EUR.

GBP

Pound Sterling has continued to drop off with the Australian
Dollar moving higher still to 0.5238, regaining much of the ground lost to GBP
post-election results. Boris Johnson is planning to introduce new legislation
which would stop any extension to the transition period for Brexit however this
of course leaves open the possibility of a no-deal. The very mention of a
no-deal Brexit is enough to rattle some traders, but the markets that have
declined haven’t fallen that much, which suggests the fear has not gripped the
entire market. On the data side of the equation, the headline rate of output
inflation for goods leaving the factory gate was 0.5% on the year to November
2019, down from 0.8% with the final PPI Input reading coming in at -0.3%,
missing expectations. Ahead today we have UK Retail Sales and the Bank of
England is in action with their monetary policy decision where it is
largely expected to keep rates on hold.

NZD

The Australian Dollar is on the way down after strong NZ GDP
data released this morning, AUD is currently looking for support around 1.0400.
The strong data was led by higher retail consumption and helped GDP increase by
0.7% in the September quarter. No other NZD Data but with Australian Employment
data out later this morning expect further movement in AUD/NZD rates.