Currency Update - Thursday 7th March 2019
AUD
Our local unit opens considerably lower this morning having broken through the support at 0.7050 in yesterday’s trade, the catalyst for the fall coming from the weaker GDP figures. With the local economy now really on struggle street the calls for a cut from the RBA will be increasing further, despite the attempted upbeat ‘pep’ talk from Governor Lowe yesterday. GDP for the December quarter showed growth at a mere 0.2%, dragging the annual rate for 2018 down to 2.3%. Forecast was for 2.8% so a big miss from the official RBA forecast and if you remove immigration the number is even more dire, economic output per person actually declines by 0.2% minus immigration for the final quarter of 2018. AUD has once again taken on an offered tone, rates have been on hold for a record 31 months, if the economic indicators do not pick up the next move is looking increasingly like a cut. Trade Balance and Retail Sales to come today, a rebound from the prior -0.4% is needed on the retail sales to give the AUD a chance of taking back some lost ground. Commodities also slumped, adding to the AUD troubles, the CRB index sitting at 181.22 or -0.4% with losses on Oil compounded by stockpiles. Equities around the world closed lower, setting the ASX up for a down day. 0.70 is the next key support, will we see the AUD break lower before the week is out?
USD
The big dollar took to higher ground overnight, AUD sliding on the weaker growth numbers, GBP and EUR also weaker as Brexit continues to concern. USD caught a bid despite dovish comments from the Fed’s Williams (Hawk) telling markets the FED could deal with another slowdown if needed and that QE was the favourable tool. The Donald remains under political pressure; the Democrats are expected to demand to see the President’s tax returns within the coming weeks after Michael Cohen’s testimony on the hush money affair. Trump’s longtime friend and inaugural chair, Tom Barrack, has confirmed he will be cooperating with the judiciary committee requests for documents, he is just one of 81 witnesses to receive the request. More talk of a deal coming to a close in the near future between China and the US, but nothing confirmed as yet and it seems the ‘Rocket man’ may be back – satellite images appear to show the North Korean missile sites being rejuvenated in the wake of the recent break down of talks. The pressure is mounting for the Donald on all fronts. Data wise the ADP read was a miss (183k vs 190k forecast) the Trade balance deficit increased by just under 2 billion but the Greenback remained solid. Jobless claims to come tonight ahead of the NFP, Average Earnings and Unemployment rate to close out the week tomorrow.
EUR
The AUD was battered lower yesterday after a weaker than expected result for Q4 GDP. The quarterly measure fell by 0.1%, which dragged annual GDP down from 2.6% to 2.3%, far behind the RBA's expectations for 3% last year! Still, the RBA Governor is broadcasting that all is not lost and that the RBA board believe economic grwoth will pick up in H2 2019. The AUD fell out of bed, opening close to 1% lower against the Euro at 0.6213. With no data from Europe to report it was a quieter session overnight, Eurodollar stable around 1.13. The lastest round of European PMIs were better than expected, bringing some hope to the dire track record of weak data over the past months'. It's a big night for European data with the release of Q4 GDP and with a central bank monetary policy decision.
GBP
Reports that talks between U.K and EU Brexit negotiators remain 'difficult' kept the Pound on the back foot. The AUD opens at 2 month lows at 0.5335, the level the AUD dropped to during the flash crash in early January. Much of this weakness was due to weak a domestic Q4 GDP result. The AUD is likely to remain under pressure over the coming months as calls for an RBA rate cut intensify. Keep an eye on local data folks, today's Retail Sales and Trade Balance will be important for AUD sentiment. Second-tier U.K Housing data is released this evening. Brexit headlines will dictate direction in the Pound for the most part.
NZD
NZD/USD fell half a percent against the big dollar overnight, the Antipodeans dumped over the past 24 hours. Commodities such as gold and copper have lost their shine the past week, further pressuring the local units. AUD/NZD opens at it's lowest point (bar the flash crash) in two years this morning.
Today’s data
AUD:
Jan Retail Sales, Trade balance
USD:
Jobless Claims
EUR:
Q4 GDP, Monetary Policy Decision
GBP:
Feb Housing Prices