Currency Update - Wednesday 8th May 2019
AUD
The RBA left interest rates on hold yesterday citing an expected return to 2% inflation in 2020 and that further jobs growth was needed to meet CPI targets. The RBA will also be paying very close attention to labour markets, a stall here would likely see a cut. After an abysmal March quarter inflation read, many economists and banks expected a rate cut, or at least a specific easing bias. None of this materialised however and the AUD received a boost, at least temporarily up to 0.7045. With the underlying fundamentals poiting towards a slowing economy however investors were quick to dump the AUD, expectations for an andjustment in RBA settings almost fully priced in for July/August. Risk assets took a hammering overnight as concerns China delegates did not take kindly to Trump's latest aggressive tactic to hike tariffs to 25%, China potentially getting cold feet. This is a big risk for risk assets folks and Trump's election hopes, we'll know more over the coming days. Oil and other commodity prices fell and the USD traded sideways, allowing the AUD to keep it's head above 0.70 cents. It's a quiet end ot the week for data, the RBNZ in action this afternoon. Resistance remains around 0.7050, support at 0.6980.
USD
Equities closed much lower overnight as concerns about a failing trade deal begin to circulate. China seems to be reacting unfavourably to U.S hostilities as Trump increased tariffs on China to 25%, starting Friday. Top China delegate Liu He could well be traveling to the U.S to deliver a message as opposed to negotiate. South China Morning Post has him quoted as saying, 'when things are unfavourable to us, no matter how you ask, we will not take one step back'. Oil, copper and a host of other commodities fell overnight, equities closed with large losses (-1.5-2%), investors fears palpable. There was little data of note, the Feds Clarida suggested the U.S economy is in a good spot, with little need to adjust monetary settings as deflation is transitory. It's another quiet evening for U.S data, the DXY is trapped below 97.70, unable to breakout, AUD repreived for the time being.
EUR
Eurodollar remains around 1.12, AUD/EUR picked up 0.5% to open at 0.6264. To the data and German Factory Orders disappointed, March orders growing by 0.6% (1.4% exp). The EU revised German economic growth for 2019 down to 0.5% also. Meanwhile the French Trade Deficit for March below out more than expected, the Euro unaffected for the most part. European stocks didn't escape the negative sentiment, closing down between 1-1.6%. The recent range is expected to persist, with a quieter end to the data week. EU March Industrial Production the release of note this evening.
GBP
The FTSE closed down 1%, the U.K government confimed that the U.K would be taking part in the EU elections, whilst there's still no agreement between the Tories and Labour re a successful route for a negotiated Brexit deal. AUD/GBP dropped to 0.5296 yesterday, before recovering a full 1% opening at 0.5363 this morning. Housing data is released this evening. Friday remains the day for the large data dump, with the release of GDP, Manufacturing, Business Investment and Construction data.
NZD
NZD/USD opens sub 0.66 as the pressure piles on the RBNZ to cut interest rates today. The NZD will look like a shot duck if they do, support at 0.65. AUD/NZD looks to capitalise, opening higher this morning at 1.0624. The RBNZ rate decision is released at midday today.
Today’s data
EUR:
German Industrial Production, EU March IP
NZD:
RBNZ Rate Decision
CNY:
April Trade Balance