Currency Update - Wednesday 10th April 2019
AUD
Our Australian Dollar continues to defy, remaining well supported above the 0.71 handle and this despite a turnaround in sentiment overnight. Risk assets were offered across the board following the IMF down grade to global growth and we can expect the ASX to be sold off on open today; globally equity markets suffered heavy losses in the wake of the IMF announcement. The one local print we had yesterday came in the form of Home Loans data and was an upbeat number, perhaps indicating the doom and gloom the media are propagating may not be entirely accurate, Home Loans printed at 0.8% versus forecast of 0.5% and well up from the previous -1.2%. Prior to the IMF, the AUD was on a run and briefly traded beyond the resistance at 0.7150 ( a minor break to 0.7151). With global growth revised to 3.3% for the year, down from 3.5% forecasted in January, the AUD like other risky assets was offered across the board. Downside risks to the global economy such as the ongoing Brexit fiasco, global trade tensions (thank you Mr.Trump) and a slower US economic outlook were sighted as the IMF concerns. The updated forecast is the lowest projection since the GFC. Westpac Consumer Confidence up this morning ahead of a key speech from Deputy Governor Debelle at 1340.
USD
The Greenback was the benefactor of the IMF downgrade overnight as sentiment reversed and investors sought safe havens for their pennies. The IMF have downgraded the global outlook to levels not seen since the GFC, the Donald’s aggressive trade policies sighted as one of their major concerns. Negative sentiment dragged the AUD lower after hitting highs of 0.7151 versus the big dollar. US bourses did not escape the route as equities around the world were sold off in fear, the DOW closed 0.7% softer with the S&P and the Nasdaq both down by a half of one percent. After a weak start the USD begun to catch a bid following the IMF downgrade and AUD/USD opens this morning off the highs at 0.7120. Data wise there was little to consider from the States overnight but there is much to come this evening; CPI and Average Hourly Earnings kick off proceedings ahead of the Monthly Budget and the FOMC minutes from their latest meeting. Inflation is expected to be a solid print and supportive of the USD but the FED comments are likely to offer a dovish tone, much like the IMF a downgrade to projections is expected and these FED minutes are likely to provide exactly that.
EUR
The IMF cut global growth forecasts overnight and President Trump threatened Europe with Tariffs. Risk assets didn't like the news, European stocks closing in the red as you would expect. Another quiet 24 hours for currency volatility, Italian Retail Sales grew by 0.1% in Feb (-0.2% exp). EU Bureaucrats await U.K politicians to provide a credible way forward before any extension to Brexit is approved. Frrench & Italian Industrial Production are released this evening, the main event comes in the form of an ECB rate decision and statement. Draghi is likely to wax dovish, with rates are not set to move until at least 2020 according to the President of the central bank. The Euro is trading in a big old range against the USD and is trapped against the AUD.
GBP
The Commons voted in favour of May's plan to request an extension to Brexit until June 30th. Tusk would prefer a longer extension to the chargrin of Brexiteers, who now believe May has backstabbed them by consulting with 'Marxist' labour leader Corbyn. The Brexit rollercoaster continues, with the main volatility seen against the USD. AUD opens flat this morning at 0.5450. February's U.K Trade Balance and GDP numbers will be important this evening. The U.K economy has out-performed that of Europe over the past year. Any longer term Brexit extension increases the chances of either a soft Brexit (customs union), or no Brexit at all. The Pound would flourish in such an environment.
NZD
With no data to report on for the Kiwi, it traded flat against the USD and AUD. Commodities softened a touch overnight, oil coming off from it's recent stellar run. NZD to react to risk flows and movements in and out of the USD.
Today’s data
AUD:
April Consumer Confidence, RBA's Debelle SPeaks in Adelaide
USD:
March CPI,. FOMC Meeting Minutes
EUR:
ECB Meeting, FR, IT Industrial Production
GBP:
Trade balance, GDP