Currency Update - Wednesday 18th December 2019

AUD

Yesterday the RBA released the minutes from its Board Meeting
earlier this month at which the interest rates were left unchanged. The minutes
were clearly dovish, warning markets that the next meeting in February should
be considered ‘live’ and ‘it would be important to reassess the economic
outlook in February 2020, when the Bank would prepare updated forecasts’.
Markets are now pricing in a 40% chance of a rate cut at the February meeting,
with labor market performance to prove key between now and then, the first
update of which arrives tomorrow with jobs numbers and the unemployment rate.
Should be quiet local trading conditions until then.

USD

AUD opens slightly lower at 0.6851 after yesterday’s dovish RBA
Board Meeting Minutes. A quiet overnight session with little in the way of data
from The ‘States, with impeachment rumblings continuing to make headlines. The
first impeachment vote takes place tomorrow in the Democrat-controlled House
and is likely to pass, the President facing two charges. Importantly none of
Trump’s Republican allies look to be wavering and without significant
Republican support, the impeachment process is doomed to failure when the vote
goes to the Senate. With no data of note on the radar tonight, AUD likely to
trade a tight range against USD over the next 24hours.

EUR

AUD lower here as well this morning, 0.6144 the open. Tonight’s
German Ifo Business Climate numbers the last data piece of note for the week
from the Eurozone, although doesn’t tend to move currencies. Tomorrow’s local
employment numbers should add some spice to the curry.

GBP

AUD opens higher this morning, having regained the 0.52 handle
at 0.5214 and now only 1 percent lower than the pre-UK Election levels.
Overnight news surfaced that the UK Government plan to legislate that Brexit
can’t be extended beyond the Dec 2020 when the current transition period ends,
the GBP weaker in the aftermath. The UK employment data was mixed, with the
unemployment rate improving to 3.8% however unemployment claims increased by
more than expected. Tonight we get the latest CPI numbers before the Bank of
England’s monetary policy meeting tomorrow night.

NZD

AUD is continuing to hold on to the 1.04 handle against NZD,
1.0420 at time of writing. This morning’s Fonterra milk auction showed a
reduction in milk prices by 5.1% with currencies unmoved. Markets will be
anticipating the Kiwi GDP numbers due tomorrow morning, which combined with
local employment figures released shortly after should make for some price
action tomorrow.