Currency Update - Tuesday 18th June 2019

AUD

The AUD continues to flounder under a broadly stronger USD, trading as low as 0.6849 overnight.  ASX Futures open a shade above 6540, global stock generally well bid overnight also. Without any local data to report on yesterday the AUD traded in a tight range, support at 0.6840 holding for now.  Oil price fell 1% as markets discount the probability of a conflict in the Middle East.  Today's RBA Meeting Minutes should provide further clairty as to the future direction of monetary policy.  Governor Lowe has already insinuated that rates are likely to move lower however, so maybe today's minutes will be a non-event.  Lowe may expand on the RBA's view that unemployment can indeed be pushed lower without generating too strong an inflation level.  Iron Ore continues to be well bid, commodities supportive of the AUD.  The Fed's meeting tomorrow evening is the risk event for the week, until then support remains at 0.6840, resiatance at 0.69 & 0.6950.

USD

The USD opens well bid this morning, making comfortable ground against the Antipodeans and trading in a seesaw action against the majors.  DXY opens at yesterday's 97.50 level.  With regards to the U.S/China trade war, Wilbur Ross said that a deal was unlikely at the G20, as the scope of the deal and differences between the two countries will take much longer work through.  To the data and Empire Manufacturing for June printed at -8.6 (11.0 exp), the Housing Market Index was marginally lower.  Wall Street was mixed with small gains for the bellweather S&P, Nasdaq was up 0.6%.  Oil price fell 1% as the IEA said the outlook was bearish.  Second-tier economic data is released this evening, markets are likely to remain sluggish before tomorrow's incredibly important FOMC decision, statement and dot plot.  Most market participants expect no rate cut (30% chance), with the Fed preparing markets for a rate cut later in the year (July-Sept).  The meeting certainly has the power to get things moving, futures markets see the Fed cutting rates three times this year.  Fed Chair Powell's signaling has been terrible to date, as in the past it could be that futures markets are incorrectly interpreting Fed member's messaging to markets.  

EUR

It was a quiet session for the Euro which traded inside yesterday's range, an indecisive 24 hours before the Fed's meeting tomorrow evening.  Economic data from Europe was lacking, AUD/EUR opening lower however at 0.6106 and in danger of beaking support at 0.6100.  The AUD is finding it tough going across the board as expected RBA rate cuts from July-Sept is weighing on appeal.  This coupled with collapsing bond rates see the AUD sidelined in global currency baskets.  The RBA Minutes today could get the AUD moving, the RBA have signaled further rate cuts however so maybe not too much to shock markets in today's release.  European stocks closed having made modest gains.  CPI, Core CPI and ZEW German Sentiment Survey are released this evening, Draghi is also on the wires. 

GBP

There's nothing much to report out of the U.K, AUD/GBP opens marginally higher at 0.5465 as the Pound continues to be sold off against the USD as chances of a hard-Brexit increase to around 30%.  It is more likely however that there will be a general election if Boris Johnson is elected and pushes the U.K to a hard Brexit in October, delaying Brexit even further.  No U.K data is released this evening. 

NZD

AUD/NZD opens at 1.0549, NZD/USD opens at 0.65 U.S cents as the USD retains it's bid in markets overnight.  The Kiwi still looks vulnerable to further USD gains, especially if futures traders have it all wrong about the Fed's expected rate cutting cycle this year.  We'll get more information at the Fed's meeting Wednesday evening.  Westpac Consumer Sentiment was released this morning and printed close to expectations.  

Today’s data

AUD:

  • RBA Minutes

USD:

  • Building Permits, Housing Starts

EUR:

  • Final CPI, Core CPI, Trade Balance, ZEW Survey 

NZD:

  • Q2 Consumer Confidence

CNY:

New Home Prices

FX Corp