Currency Update - Thursday 18th April 2019
AUD
Our local unit is comfortable in the recent range of 0.71-0.72 and despite a break higher in yesterday’s trade the AUD failed to hold those gains overnight. Chinese data was the catalyst for the Aussie to break through the recent highs and 200 day moving average of 0.72; Chinese Industrial Production and Retail Sales both beat their forecast but the surprise growth in GDP was the major driver, the YoY figure printing an actual of 6.4% versus forecast of 6.3%. With the ongoing trade tariffs showdown expected to have damaged Chinese growth many investors expected the GDP to print at 6.2% (which would have been close to a 30 year low) so the steady 6.4%, an equal to the previous months print, was a positive note for markets. Industrial Production also surprised to the upside with a solid 8.5% versus 5.9% forecast and Retail Sales rounded off the positive data dump with 8.7% versus 8.4%. AUD rallied as a result and broke through the 0.72 handle during local trade but failed to hold those gains as we head in to the long weekend. We open this morning back sub 0.72 at 0.7170. Employment numbers are up today and the data takes on new significance as a key factor in the RBA’s conundrum, to cut or not to cut. Expectation is for the Unemployment rate to tick back to 5% with 15k of new jobs created.
USD
Currency moves were sluggish again overnight with the majority of pairs holding range, liquidity and currency flows were light ahead of the extended weekend break and despite a break above 0.72 AUD/USD drifted back to course. US markets all closed in the red, albeit to minor losses; the DOW and Nasdaq -0.1% and the S&P -0.4%. Mortgage Applications declined a further 3.5% in February and Wholesale Inventories missed their mark at 0.2% versus 0.4% expectation. FED data, in the form of their most recent beige book, went to print and showed economic activity growing moderately, the US Labour market remains tight and much like here, wage growth is slow. USD moves were subdued despite the data with most pair returning to recent form and familiar ranges. Retail Sales heads up the data from the States tonight but we have Jobless Claims, PMIs and Housing data to come before the week closes. Unconfirmed reports of an agreement between China and the US also fueled risk assets higher, reports suggesting an announcement may be imminent of face to face meetings to conclude and sign an agreement. More to come on this, no doubt.
EUR
European equities were, on the whole, positive to the close, the CAC the standout performer at +0.6%. AUD remains in a very tight range when priced against the single currency with many investors awaiting further Brexit developments for direction. Data from the Zone was benign once again, with Core CPI for the year flat at 0.8% and CPI at 1.4%. The Germans revised growth forecasts, down, as markets feared. Expectation is now for the Zone’s largest economy to grow at 0.5% for 2019. ECB’s Nowotny though did provide some upbeat rhetoric, suggesting the EZ Economy should stabilize in the second half of 2019 and growth forecast are not likely to be downgraded “significantly”!! Maybe just a little bit though! Germany and the Zone as a whole to announce PMIs this evening.
GBP
U.K CPI printed, as expected at 0.2% for March, dragging the annual rate down to 1.9%, 0.1% under the forecast and the Core rate a similar story. GBP though remained within range as currency markets slowed in to the long weekend. Brexit continues to bore the world, no real change and the infighting of UK politicians continues unabated. Mark Carney, the BoE Governor has warned global banks they cannot ignore the danger presented by climate change, calling on central banks, government and financial institutions to take the lead on battling the issue and calling for low carbon economies. Retail Sales from the UK up tonight along with the BoEs Credit Conditions and Bank Liabilities Surveys. No doubt further Brexit headlines will come over the weekend too!
NZD
AUD/NZD jumped another leg higher yesterday following the weak print of CPI from across the Tasman; expectation was for the quarterly figure to print at 0.3% and the Annual to be 1.7%, both missed their mark by 0.2% and sent the Kiwi tumbling lower. AUD/NZD failed just shy of 1.07 and currently sits at highs not seen since November of last year. The Chinese data did provide some support for the Kiwi against other pairs but in the cross Tasman battle the Aussie was the winner. Nothing to come from the NZ Economy on the data front to close out the week so expect the NZD to remain offered, NZD/USD just holding on the 0.67 handle for now.
Today’s data
AUD:
NAB Business Confidence, Employment Change, Unemployment Rate
USD:
Retail Sales, Initial/Continuing Jobless Claims,PMIs
EUR:
Germany PMIs, Eurozone PMIs
GBP:
Bank of England Credit Conditions & Bank Liabilities Surveys, Retail Sales Ex Auto Fuel.
NZD:
No Data