Currency Update - Wednesday 17th April 2019
AUD
After suffering losses inspired by the RBA minutes throughout local trade the Aussie managed to shrug off the downward pressure overnight and rallied to highs of 0.7179. The RBA minutes had somewhat of a dovish tone but none more than was expected, the board did discuss the possibilities of future rate hikes but agreed the likeliness of raising the cash rate “in the near term was low” in fact the comments suggest any “near term” moves are unlikely; “members agreed that there was not a strong case for near-term adjustment in monetary policy”. With many investors still betting on a cut the board also pointed out that they see little benefit in moving the cash rate, given that it is already at record lows. Thursday’s employment data will be key for the RBA’s future thinking as the labour market is the one solid data piece in the Australian economy of late. The AUD recovered overnight after comments from ‘rate whisperer’ Terry McCann, his article suggesting the RBA will remain on hold unless there was a significant increase to unemployment or an as yet unseen global event. Westpac Leading Index to print this morning along with a host of Chinese data, culminating with the China GDP figures. Solid numbers from our largest trade partner could inspire further AUD gains, tomorrow’s local Employment numbers will be the key note for the week.
USD
A quiet session for the big dollar overnight, the USD was range bound versus most of its peers, the AUD did manage to regain the losses from our local session as investors try to guess the RBA’s next move. In DXY terms the greenback was slightly higher (0.11%) at 97.05, volatility has been low this week, the VIX currently off by -0.9% at 12.22. US data printed slightly to the downside with Industrial Production at -0.1% versus forecast of +0.2% and Manufacturing Production flat at 0.00% versus forecast of a 0.1% gain. USD reactions though were muted, Wall Street closed in the black which should provide the ASX with a decent lead at open although commodities were slightly weaker at the close. Chinese data will take centre stage today, the key note of GDP to come around midday local time ahead of US Trade Balance, Mortgage Applications and the FED Beige Book this evening. AUD/USD needs to break and close above the 0.7194 handle to convince of a run at 0.72 and 0.71 remains the support.
EUR
AUD/EUR has made small gains the past 24 hours, whilst Eurodollar remains at 1.30. The German ZEW Survey provided more positive expectations, current readings lagged however. The main news from Europe overnight came in the form of several ECB policy makers who questioned the accuracy of ECB forecasting models. They noted in particular the ambitious H2 forecasts, saying the reality could be much worse. Eurodollar dipped but recovered later in the session. This isn't a good look for the ECB and shows the dishamony amongst ECB members. Meanwhile the printing presses are likely to fire up again soon with new & extended cenral bank loans. EU Current Account, Trade Balance and CPI are released tonight, all important numbers for the EU bloc.
GBP
The AUD opens higher against the Pound at 0.5496 this morning depsite U.K unemployment data remaining at multi-decade lows of 3.9%. Average earning figures improved, but came on target. GBP/USD remains around the mid 1.30's. Talks between May and Corbyn will continue over the coming weeks, although Corbyn has suggested that talks are stalling. The FTSE gained 0.4% into the close. March Inflation numbers are released this evening, we get a bumper release of CPI, RPI, PPI and HPI!! Annual CPI is expected to reach 2%, these numbers have the power to influence the Pound. Brexit developments as always key to Sterling volatility.
NZD
New Zealand just produced a shocker of a CPI number, 0.1% (0.3% exp), which has sent the Kiwi reeling this morning and crashing against the AUD, now at 1.0688 and after reaching a high of 1.0730. This latest read of inflation will likely persuade the RBNZ to cut rates at their next meeting, which will weigh heavily on the Kiwi over the coming weeks. NZD/USD has fallen from 0.6770 to 0.6700.
Today’s data
USD:
February Trade Balance
GBP:
March CPI
CNY:
March IP, Retail Sales, Fixed Asset Investment, Q1 GDP