Currency Update - Wednesday 5th June 2019
AUD
The RBA cut interest rates by 25 basis points yesterday, the AUD was having non of it however, steadily rallying before the decision and posting an overnight high of 0.7005. In a speech last night Governor Lowe said it was 'not unreasonable to expect further reductions to the cash rate'. Most market participants have priced in a further rate cut by September. Low also called for more fiscal stimulus, calling on the government to assist the RBA's monetary policy adjustments. Yesterday's Retail Sales data disappointed also, printing -0.1% (0.2%) expected, making the AUD's rally even more impressive. The AUD had broken meaningful resiatance the evening before on account of a weaker USD. Bond markets fully expect a number of rate cuts in the U.S by the end of the year, which has recently weighed on the worlds reserve currency. Stocks rallied, ASX futures have alsmost reclaimed the 6400 handle this morning. GDP q/q is released at 11:30am today, the economy is expected to have grown by 0.4%, which could be a tough number to hit considering the weak showing from GDP partials leading up to the release. Resistance is at 0.7050, support now comes in at 0.6960.
USD
Risk appetitie caught a bid overnight as Republican leaders said they would move to squash Trump's threatened Tariffs on Mexico. This was enough to see Stock Indices rally close to 2% in the U.S. Adding to the 'risk on' feel to trade was Fed Chair Powell who suggested an openness for a Fed rate cut if the trade war starts to bite. The Powell put coming into play in overnight markets, the Governor showing a willingness to act to sustain economic expansion. U.S yields also regained some lost ground, the DXY fell close to support at 97.00. The USD fell against the majors, Eurodollar rallying, much like the Antipodeans. U.S Durable Goods Orders for April matched expectations at -2.1%, Factory Orders fell by 0.8%, better than expectations of -1.0%. Services PMI, ADP Payrolls and ISM Manufacturing data are released this evening.
EUR
AUD/EUR opens flat despite European Core CPI printing below expectations for May at 0.8% (0.9% exp) and EU Unemployment falling 0.1%. AUD/EUR didn't benefit from yesterday's local action, unlike AUD/USD. This may change tomorrow evening however as the ECB launch their own Monetary Policy Decision. No change to rates are expected the central bank could wax dovish on the outlook however. European stocks closed higher overnight, May Services PMI are released this evening.
GBP
AUD/GBP jumped over 0.55 yesterday, the AUD supported by weakness in the big dollar and weaker construction PMI from the U.K overnight. Brexit news has gone quiet for now, the tory leadership battle is hotting up with Boris the outright favourite, which would increase the chances of a hard Brexit. The Pound rallied against the USD, up over 1.27 this morning, the FTSE rallied 0.5%. No data released from the U.K tonight.
NZD
The Kiwi opens higher against the USD this morning, AUD/NZD is flat. A dairy auction confirmed prices for milk and and milk powder have fallen. It's a quiet end to the week for Kiwi data, the NZD to react to movement in the USD.
Today’s data
AUD:
Q1 GDP
USD:
May ADP Employment, ISM non-manufactuing index
EUR:
April Retail Sales, EU May Services PMI
CNY:
May Caixin PMI