Currency Update - Friday 10th May 2019
AUD
The AUD and risk assets in general continue to be held back by the ongoing trade disputes between the U.S and China. With no conclusions in sight and tariffs on $200bn of Chinese goods to be increased to 25% later today, the AUD is likely to remain under pressure. The AUD failed to rally above 0.70 U.S cents yesterday, falling close to 0.6960 support overnight as equities & commodities were sold off, oil & copper falling 0.8%. The Chinese Ministry of finance have said that they were fully prepared to defend their interests and oppose unilateral action, but hope to resolve trade disputes with the U.S. We'll know more by Monday, but it is looking more and more likely tariffs will be increased from 10% to 25%, as the prospects of a fully negotiated deal within 24 looks slim, AUD risk? Yesterday's Chinese CPI printed as expetced at 2.5%, PPI beat estimates of 0.6% (0.9% act). Later today the RBA release their latest Statement on Monetary Policy. Naturally markets are not expecting a bullish tone, more insight into growth and inflation adjustments could see the AUD drift down to support at 0.6960, resistance is at 0.7050. U.S CPI data released this evening will also be important for AUD direction.
USD
U.S data was marginally weaker than expectations overnight, PPI, Trade data and Weekly Jobless Claims all falling below expectations. The USD retained it's strengh however, opening at 97.42 in DXY terms, but marginally lower against the Euro. Trump hit the wires again, with his own interpretation of how trade negotiations are progressing, announcing that China cannot be allowed to renegotiate the trade deal and that he had an 'excellent alternative'. As you can imagine the detail wasn't forthcoming. Tensions are increasing, investors are on high alert as increased tariffs kick in later this evening. U.S equities fell for the fourth straight day, bouncing off immediate lows to close down 0.5%. CPI data looms large this evening, core inflation is expected to have remained strong, with seasonal and transitory factors possibly weighing on the headline number. The USD has been contained all week, could this be the stimulus for another DXY breakout? We'll know first thing Monday.
EUR
European equity markets took a beating overnight, down between 0.9-2%. Spanish Industrial Production sank to -1.2% in March (0.3% exp). The Euro was litle effected and actually made small gains against the big dollar and larger 0.7% gains against the AUD. Volatility again was muted overnight, the Euro hanging tough for now. France and Italy release their own Industrial Production numbers this evening, meanwhile news of the U.S/ China trade deal the main risk event for the weekend.
GBP
AUD/GBP opens marginally higher this morning at 0.5370. With no news to report and no new Brexit developments the Pound traded in a tight range against the USD (1.30) and AUD. It's a huge end to the week for U.K data, with the release of GDP, Manufacturing Production, Business Investment, Construction and Trade Balance numbers.
NZD
The Kiwi still lags the USD at 0.6887 this morning, the RBNZ's rate cut and dovish outlook weighing on NZD sentiment. The AUD just about reclaimed the 1.06 mark and looks to close the week above this key level. Market moves will be data driven this weekend, much depends on China as always, the Antipodeans overly sensitive to the economic impacts of the world's second largest economy.
Today’s data
AUD:
RBA monetary Policy Statement
USD:
April CPI
EUR:
FR, IT March Industrial Production
GBP:
Industrial Production