Currency Update - Friday 3rd May 2019

AUD
The AUD opens under pressure this morning at 0.6999 U.S cents as traders and investors digest the Federal Reserve's latest rate signal.  U.S stocks closed under pressure also, weighing on ASX futures, markets await tonight's non-farm payrools for further direction. Yesterday's New Home Sales figures disappointed at -0.1% (1.0% prev) keeping up the pressure on the beleagured local unit.  Tuesday will be pivotal as the RBA decide whether or not to slash interest rates.  Aussie banks have doubled down on their expectations for a cut, with only a minority of commentators/economists believing the RBA will hold off.  Investors are still waiting for news on the U.S/China Trade Deal, prividing further uncertainty and pressure on the risk effected AUD.   Local Building Approval data is released later this morning, AUD to remain pressure in today's session and in the lead up to the RBA on Tuesday.  Suppport is found at 0.6980, resistance at 0.7060. 

USD

U.S treasury yields jumped as investors bet that U.S interest rates will be on hold for longer. Chairman Powell's comments on the 'transient' nauture of factors keeping inflation low forcing investors to reassess their dovish view of the Fed's monetary outlook.  Unit Labour Costs and Unemployment Claims both printed below expectations overnight.  This evening's payroll numbers will provide far more insight into the state of the U.S economy however.  Much like Australia, positive employment is keeping the economy afloat, this is more typical in service based economies like ours.  The USD Index strenghtened, the big dollar up against most majors and closing at resistance - 97.80.  The outlook for the AUD depends very much on this weekend's macro data (Payrolls, Services PMI, Average Wages) and Tuesday's RBA rate decision.  

EUR

European Manufacturing PMIs were solid for the most part, Germany slightly missing it's mark despite a low forecast of 44.5.  Eurodollar was pushed back down to 1.1170, GBP/USD was spared above 1.30.  AUD opens flat but under pressure as most analysts and retail banks here in Australia believe the RBA will slash interest rates on Tuesday.  Meanwhile the flash estimate of EU CPI and PPI is released this evening.  With Inflation lagging, the ECB are likely to step in at some point and provide new and extended loans to banks.  This should in theory weaken the single currency and take USD/EUR above key resistance.    

GBP

The Bank of England Governor Carney warned that interest rate hikes could be 'more frequent' than expected if the economy performs as they are expect.  This is also dependent on a smooth trading transition with the EU.  Markets are forecasting just one rate hike before the end of 2021.  The BOE are expecting growth and inflation to pick up over the next two years.  Any Brexit deal trade-off between the Tories and Labour is still underway.  Positive headlines are being released, but those close to the action report the unwillingness of both sides to compormise as such stark fundamental differences remain between their strategic policies.  U.K Services PMI to be released this evening.

NZD

The Kiwi opens flat against the AUD and lower against a stronger USD this morning, opening at 0.6617.  Kiwi data is thin on the ground today, with Japan still out for holidays it should be a quiet days trade.  U.S Non-Farm Payrolls this evening will dictate direction. 

Today’s data

AUD:

  • Building Approvals m/m

USD:

  • Average Hourly Earnings, Non-Farm Payrolls, Unemployment Rate, Services PMI, Wholesale Inventories, FOMC chatter

EUR:

  • CPI m/m, PPI m/m, Core CPI

GBP:

  • Services PMI 

NZD:

No Data 

FX Corp