Currency Update - Wednesday 3rd April 2019
AUD
The RBA remained on hold for the 29th consecutive month yesterday despite concerns surrounding economic growth and low inflation, the comments though were of a dovish feel and the AUD dropped as a result. There was little change to the statement and no move to an easing bias, yet, but comments that the central bank would “set policy to support sustainable growth” were seen as dovish. AUD/USD fell from the 0.71 handle to 0.7080 immediately following the announcement as investors saw the comment as a solid hint the RBA would cut rates if a turnaround was not evident in the near future. Futures are now fully pricing in a 0.25% cut for September and with only the labour market (excluding wage growth) supporting a decision to hold for now, it seems unlikely a turnaround is on the horizon. The AUD continued to fall overnight although the support at 0.7050 has held for now, a good sign for the Aussie and with the $7.1bn surplus forecast announced overnight we may see some consolidation from here. The budget also provided tax cuts for business and individuals as well as big infrastructure announcements. Retail Sales is up this morning along with local Trade Balance, the AUD will be vulnerable following the RBA dovish tilt so a miss on either could signal further selling. 0.7050 remains the key downside support with 0.71 and then 0.7150 as resistance.
USD
The big dollar was well bid overnight, AUD/USD fell to recent lows of 0.7052 but notably the key support of 0.7050 has held. Brexit remains a key risk and is fueling USD buying on safe haven plays, as are the ongoing Sino/US negotiations. Data wise the Durable Goods prints were a beat on forecast at -1.6% versus -1.8%, the Ex Transport number printing at 0.1% to meet expectation and rise from the previous -0.1%. US markets were mixed, the DOW actually closing in the red at -0.3%, the S&P and Nasdaq though in the black to the tune of 0.1% and 0.3% respectively. Crude Oil rallied once again, adding another 1.8% but in DXY terms the USD is actually marginally weaker at 97.31, a loss of 0.03%. Mortgage Applications to come tonight ahead of the ADP Employment Change read with Non-Manufacturing/Services Composite data from the ISM a little later.
EUR
European PPI fell by 0.1% overnight, the Euro fell against the USD and remains stable versus the AUD. European equities were bid as risk sentiment remains bouyant. With a lack of meaningful European data all eyes were on Brexit developments overnight, Theresa May is now willing to discuss a way out of the Brexit impasse with Labour leader Corbyn, which could lead to a softer Brexit. Services PMI's are released this evening.
GBP
Construction PMI printed 0.1% lower than expected overnight at 49.7. The FTSE closed 1% higher as the risk tone remains elevated. British P.M May has asked the EU for an extensikon of Article 50, whilst approaching Labour leader Corbyn for talks to break the current Brexit impasse. A softer Brexit which includes some sort of customs union is now more likely, chances of a hard-Brexit also elevated. Brexiteers are up in arms at May's capitulation, but with parliament unable to find any majority she has been pushed into a corner. Politicians can only agree that they want to avoid a hard Brexit. The Pound made a mini comeback against the USD and AUD, which opens at 0.5383 this morning.
NZD
AUD/NZD remains better bid after a more dovish RBNZ last week. The AUD fell to 1.0250 before a swift recovery late last week. Oil price continued it's remarkable 2019 rally, up 38% this year. A dairy auction released early this morning showed that whole milk powder prices had fellen 1.3%, although the GDT Price Index was up 0.8%. No major reaction in the Kiwi which opens lower against a resurgent USD and towards recent lows against the AUD.
Today’s data
AUD:
Feb Retail Sales
USD:
ADP Employment, ISM Non-Manufacturing
EUR:
Feb Retail Sales, March Services PMIs
CNY:
Caixin China PMI Services