Currency Update - Wednesday 1st May 2019
AUD
The AUD opens flat this morning, unable to take advantage of USD weakness overnight as the prospect of a potential RBA rate cut on Tuesday is enough to contain AUD gains. Chinese Manufacturing & Non-Manufacturing PMIs printed yesterday and missed forecasts, Caixin Manufacturing (the more important of the trio) also printed lower at 50.2 (51.0 exp). The AUD dipped, but held onto the 0.70 handle. Equities were mixed overnight, ASX opening at 6341 this morning. Volatility should be light today as many countries are closed for public holiday's including Singapore, China, Japan and most of Europe. The AUD awaits it's direction from the FOMC decision this evening, where rates are expected to remain on hold, the board maintaining a 'patient' bias. Key support at 0.6980, resistance is found at 0.7100/25.
USD
Sterling and the Euro climbed against the USD overnight, sending the DXY back below 97.70, cementing a fake breakout for the USD last week. Economic data was mixed with April's Consumer Confidence printing an impressive 129.2 (126.8 exp), Pending Home Sales beat expectations also. Chicago PMI failed to match expectations at 52.6 (58.5 exp). The USD fell as more positive Brexit news saw the Pound rally and positive European data saw the single currency reclaim important territory. Trump intervened, poking his nose into central bank business, saying the U.S economy would go up 'like a rocket' if interest rates were cut. Despite his criticism of the FED, there was limited reaction in markets. Wall Street was a mixed bag with the S&P and Dow posting small gains, Alphabet dropped -7% taking the Nasdaq lower after reclaiming fresh highs earlier in the week. Tonight sees the release of ISM Manufacturing and the FOMC decision. There is unlikely to be much change to monetary policy direction after the return to dovishness in March. U.S data hasn't been marvellous over the past few weeks, this shouldn't be enough to change the Fed's current 'patient' outlook however.
EUR
The Euro has picked itself up off the ground, reclaiming the 1.12 handle against the USD, which fell in DXY terms by 0.4%. More positive data from Europe overnight helped the Euro push the AUD down to 0.6282. French data was marginally weaker than expected, Spain impresed however, with a 0.7% GDP read (0.6% exp), CPI printed 0.1% under target. German CPI m/m impressed at 1.0% (0.5% exp), the unemployment change double that of expectations. Italian monthly unemployment posted a welcome beat, meanwhile EU Flash GDP q/q hit 0.4% (0.3% exp), Italian Prelim GDP at 0.2% (-0.1% exp). The EU unemployment rate fell by 0.1% too, so all in all much improved data. This wasn't lost on traders who pushed the Euro back above previous resistance. A plethora of EU bank holiday's this evening, so there'll be no data to report tomorrow, FOMC decision to drive currency volatility.
GBP
The Pound surged as the U.K government is said to be planning a final meeting with labour to try and hash out compromises in a possible Brexit deal. Sterling traders jumped on the news bidding the Pound higher. This and news that the labour party would support a second referendum if there was no general election or government policy change, sent the AUD to recent lows of 0.5400 against the Pound. If past performance is anything to go by, the chances of a cross-party deal being negotiated are slim. Another referendum would send the country into a spin however. labour's latest political move should sharpen minds around the negotiating table. Manufacturing PMI is released this evening.
NZD
The quarterly unemployment change collapsed in N.Z last month, numbers released this morning confired (-0.2% v's 0.5% exp), the Labour Cost Index falling 0.2% also. The AUD has shot up to 1.06, the Kiwi making up further ground against the USD also at 0.6642. FOMC this evening will be important for NZD direction.
Today’s data
USD:
ADP Employment, ISM Manufacturing, FOMC Rate Decision and Press Statement