Currency Upate - Thursday 21st March 2019
AUD
The Westpac Leading Index printed flat yesterday, adding to the concerns highlighted by the RBA earlier in the week. The slowing of the local economy, notably the housing market but other “significant uncertainties” are weighing on the AUD but the Aussie battler is doing a good job of shrugging of the downside pressure and the U.S dollar is not fairing so well in of itself. AUD/USD managed to take back the 0.71 handle following more ‘dovish’ commentary from the FED overnight and a weaker USD as a result. We now look to today’s local Employment numbers for direction; Employment Change is forecasted to add 15k in new jobs with the Unemployment Rate carded to remain flat at 5%. Any major deviation from those number will increase the volatility for the AUD, the risk may be slightly skewed to the downside with some commentators expecting the Unemployment Rate to tick higher. Support is found at 0.71 AUD/USD did test the 0.7150 on the FOMC release overnight, a break there will bring 0.72 in to view.
USD
The FOMC left rates on hold as was expected, comments though were more dovish than the markets were prepared for and USD was offered as a result. AUD/USD had dropped as low as 0.7058 but has retaken the 0.71 handle following the FED release. With the FED firmly on the pause button the USD has wavered, comments overnight did remain upbeat on the strength of the US Labour market but concerns remain on household spending and business investment, causing a slowdown of the burgeoning growth seen earlier in the FED cycle. Changes to the dot plot now show no further hikes for 2019 and only the one in 2020 with downward revisions to growth forecasts. Balance sheet adjustments are a tool that Powell referred to in his conference, sighting that additional changes can be made where needed but the policy right now is to taper the balance sheet, with an end seen in September. USD weaker across the board in the aftermath, Trump did attempt to put some positivity out there with an announcement that the talks with China are close but the President also warned that tariffs would remain in play for some time. Initial and Continuing Jobless data to main prints this evening.
EUR
The only piece of data from Europe overnight was German PPI, which printed worse than expected. That didn't hold back the Euro, which staged an impressive rally against the USD after the U.S Fed waxed dovish on their outlook for rates and economic growth. With the U.S central bank forecasting no change to monetary policy settings this year, the USD fell significantly, the main benefactor being the Euro, which rallied to 1.1420 sending the DXY sub 96.0. European Officials continue to strike a tough negotiating hand with the U.K over Brexit, the Pound weaker as the Brexit cliff edge gets closer. AUD/EUR was pushed lower on the back of USD weakness overnight, opening at 0.6231. Local employment data released this morning will dictate direction for the AUD. No European data set for release this evening.
GBP
U.K Inflation increased by 0.5% in February, taking the annual rate to 1.5% (1.4% expected). The Pound initially rallied before setting fresh lows as the Brexit outcome is far from certain with days left to go. May has requested a 3 month extension to Brexit and fully intends to stage another meaningful vote in parliament despite the House Speaker's deliberation earlier in the week. An emergency debate on Brexit will go ahead over the coming days. The EU's Tusk said a short extension could be possible if a vote was supported by the House of Commons. Another defeat for May could trigger a General Election and edge the U.K close to a mistaken Brexit as time is almost up! The Pound could feel some pain over the coming weeks as uncertainty remains high. The BOE are in action this evening with an interest rate decision (no change expected), February Retail Sales are also released.
NZD
Kiwi Q4 GDP came in as expected at +0.6%, the Kiwi is up at 0.6919 this morning as the USD suffered broad based losses overnight. The Fed waxed dovish, a total 180 degree turn from their forecasts and messaging just 5 months ago. It looks like interest rates are firmly on hold in 2019, with one hike scheduled for 2020. In this stimulative environment the Kiwi could take out further gains as the USD struggles for bids.
Today’s data
AUD:
February Unemployment
USD:
Weekly Jobless Claims, Philly Fed Survey
GBP:
Retail Sales, BOE Rate Decision
NZD:
Q4 GDP