Currency Update - Monday 25th March 2019

AUD

Risk appetite suffered to close out last week’s trade and the AUD was sold off as a result, as one would expect the USD was the major benefactor. Globally equities were heavily sold off on Friday as concerns around global growth played heavily on the minds of investors. The three major US bourses were hit hard with the Nasdaq closing down by -2.5% a similar story played across Europe, the major losses were for the FTSE and the CAC both down by 2% and setting up the ASX for a sorry start to the week. Commodities were heavily in the red also, led lower by a 1.9% slump in black gold, the CRB index lost 0.7%. The AUD faltered once again and we open the week sub 0.71, the Aussie suffering on risk appetite and stronger US data. This week is a quiet one for local releases so sentiment and off shore releases will provide direction, Brexit is likely to be a key driver with much going on in the UK, Central banks, including the RBNZ also provide some insight. Support now found at 0.7040/50 with resistance around 0.71 initially then 0.7150.

USD

The big dollar had a good close to the previous week’s trade, gaining on risk sentiment as concerns continue to build around global economic growth, Brexit, Sino/US Tariffs ete etc. The USD always enjoys a bid tone in a risk off environment and buyers pushed the value higher on Friday. US PMIs were short of forecast, much like those out of the Eurozone and fueling the growth concerns; Manufacturing fell from 53.0 to 52.5, short of the fexpected 53.5, Services also a miss at 54.8 vs 56.0, the two adding up to make the Composite number fall from 55.5 to 54.3. The Greenback shrugged off the data in the current environment and was supported further by the Existing Home Sales data, smashing forecast of a 3.2% increase to grow by 11.8%. Wholesale inventories also supporting the USD with a print of 1.2% vs 0.1%. US Equities though suffering a similar fate to those around the globe and getting heavily sold off, the VIX was up 20.9% and the DXY grew 0.64% to close out the week at 96.55. US data kicks off tomorrow evening with Housing Starts, Building Permits and Consumer Confidence. The Big Dollar could gain momentum with the risk off theme this week.

EUR

European equities were also heavily sold off to close out the week, the FTSE and CAC losing 2%, Germany’s DAX down by 1.6%, risk off permeating through all markets it seems. Brexit obviously still causing major concerns across the EU and UK and the most recent events will do little to assuage tensions. European PMIs also released and also a disappointment, fueling the concern on growth even further. France, Germany and the EZ as a whole all showing weak numbers for their Manufacturing, Germany printing at 44.7 vs forecast of 48.0, a decline from the previous 47.6. Germany being the largest single economy for the EZ this is not a good indicator of growth within the Zone, the Services PMIs fared a little better for all concerned. The Europeans have granted an extension to Brexit, if the PM’s withdrawal agreement is passed, if the UK Parliament once again vote it down then further chaos will ensue. Theresa May for her part is clinging to power, for now.  

GBP

Brexit continues to feel like groundhog day, when will it all end? Over the weekend in the UK a reported one million protesters marched on the UK Capital, calling for another referendum. Why not? If you don’t like the democratic process just ignore it and do it again and again until you get the result you were hoping for! The whole Brexit process continues to drive the GBP and the EUR to some degree and will be a major contributor for the foreseeable future. The PM is now, once again, facing heavy pressure from within her own party to step down, including from within her own cabinet if media reports are to be believed. There is little on the calendar from the UK data wise this week but there will be plenty of media reports surrounding Brexit and the embattled PM May, direction will be dictated by Brexit developments.

NZD

Much like the AUD, the Kiwi lost ground on risk appetite to close out last week, NZD/USD falling to 0.6866 although the Kiwi did make gains on the AUD, AUD/NZD giving up the 1.03 handle. NZ data kicks off tomorrow with Trade Balance ahead of the RBNZ on Wednesday, although the latest NZ GDP numbers were weak, the slowest growth in five years, there is little expectation of a move from the central bank and the cash rate should remain at 1.75%.

Today’s data

EUR:

• German IFO Business Climate, Expectations, Current Assessment.