Currency Update - Monday 13th May 2019
AUD
The AUD traded around the 0.70 mark at the weekend as currencies in general remained in a tight range. U.S tariffs on $200bn of Chinese goods kicked in on Friday, risk asset pricing fell marginally before Mnuchin and Trump called talks 'constructive' and with no reaction from China markets were silent for the most part. Investors remain cautious to open the week as the U.S/China trade spat continues to play out. It's a relatively busy week for local data this week, Home Loans numbers are released today, Business Confidence tomorrow, Consumer Confidence & Average Wage figures Wednesday as well as very important Employment numbers Thursday. We also get the latest installment of Chinese economic data on Wednesday. The ASX held up well last week, opening at 6303 this morning. Chinese State owned funds stepped in Friday after a small dip in Chinese equities, pushing Chinese bourses over 3% higher, the ASX also benefitting. The AUD continues to hover around the 0.70 mark, rallies above 0.7050 were a stretch last week, with 0.6960 containing the downside.
USD
U.S CPI data came in 0.1% weaker for the month and year, the core measure falling by the same amount for the month, but matching expectations for the year. The USD held up well, opening at a familiar 97.30 on the DXY. Trump is kidding himself if he thinks tariffs will bring 'far more wealth to our country', as it is American businesses and consumers that are footing the bill of the President's latest move. U.S/China trade deal negotiations are ongoing, with both Trump and Mnuchin saying talks are 'constructive'. There is a risk of Chinese retaliation to Trump's latest move to increase tariffs this week. Any breakdown in negotiations would weigh on the local unit. Fed members Williams and Bostic were positive on the U.S economcy with Bostic saying that he thinks one rate hike this year would be appropriate. U.S stocks opened with swift losses of between 1% and 1.5%, more positive sentiment than expected from trade talks allowed markets to recover with gains of around 0.5-1% at the close. It's a quieter week for U.S data this week, Wednesday's Retail Sales the pick of the bunch.
EUR
Eurodollar opens higher at 1.1235 this morning, AUD/EUR remains predicatbly at 0.6222 after weeks of subdued movement in the pair. To the data and German Trade Surplus for March came in higher than expected at 22.7bn EUR, exports growing by 1.5%. Both French and Italian Industrial Production fell by more than expected, capping Euro gains. Meanwhile The ECB's Hansson provided a more optimistic outlook than other ECB members by saying that there is no rush to add stimulus as the slow-down may be passing. That remains to be seen as European data has marginally improved of late, but not to the extend to calm investor nerves. European equities closed marginally in the black after a trip into the red in the early session.
GBP
U.K data printed better than expected over the weekend. Q1 GDP printed as expected at 0.5%, Industrial Production shot higher at 0.7% (0.1% exp). The Pound hardly reacted, making small gains against the USD, the AUD opening at last week's high this morning at 0.5375. U.K Average Earnings and Employment data are released on Tuesday. Nigel Farage's Brexit party has as many supporters as that of both the Conservative and labour parties combined according to opinion polls. The anger amongst voters is palpable, Farage will no doubt enjoy his EU speech once votes are counted. With no conclusion to Brexit expected anytime soon, the Pound should remain on the back foot. Positive economic news however is much welcomed by the U.K economy and has the power to support Sterling.
NZD
AUD/NZD opens close to 1.06 this morning, NZD/USD opens towards the bottom of its recent range at 0.6595. It's a quiet data week locally, Thursday's PPI and Manufacturing Index the releases of note. The Kiwi will react to developments in U.S/China trade deal negotiations and risk sentiment in general this week.
Today’s data
AUD:
March Home Loans
USD:
Fed members Clarida and Rosengren Speak