Currency Update - Wednesday 3rd July 2019
AUD
The AUD rallied after the RBA cut interest rates by 25 basis points yesterday. Markets are of the opinion that with back-to-back cuts the RBA will hold to review the incoming data. Further rate cuts are now expected in Q4. Governor Lowe spoke last night and confirmed this view, housing and employment data now critical moving forward and will for the most part shape monetary policy. The RBA still maintain an easing bias, inflation is also another key indicator of whether the RBA will act sooner rather than later. The number of first home buyers entering the market increased rapidly last month, up 28.8%. The AUD looks to be stabilising for a potential move higher now concerns over trade war tensions seem to have cooled (for now). With oil falling 4% overnight and gold up 2% the commodity space was mixed. Building Approvals, Trade Balance and Chinese Caixin PMI's will dictate short-term movement in the AUD. 0.7040 is resistance and then 0.71.
USD
It was all quiet from the U.S overnight, the DXY remains trapped between 95.0 & 97.0, Eurodollar remains close to 1.3, GBP/USD at 1.26, the Pound losing ground as markets begin to pay more attention to the prospects of a hard Brexit. The Fed's Mester highlighted that downside risks to the U.S economy have increased but that more data needs to be released before he would push the button on a rate cut. Wall Street crept 0.2% higher at the close, whilst 10 year Treasury yields pushed below 2%. Tonight's data includes ADP Employment, Jobless Claims, Durable Goods, Non-Manufacturing ISM and Factory Orders.
EUR
Eurodollar posted a small rally as news hit the wires that ECB officials were not inclined to adjust monetary settings this month. The Euro couldn't hold onto gains however, falling below 1.13. Later in the session news spread that Christine Lagarde had been nominated as the head of the ECB, this weighed on the Euro considering she is considered to be more dovish than her German counterparts. European stocks closed marginally higher for the most part, AUD/EUR climbing to 0.6193. Final Services PMI for June is released later this evening, which is always an important gauge of European economies health.
GBP
The Nationwide survey of house prices showed an uptick of 0.1% overnight. Meanwhile the Pound reacted to comments by BOE Governor Carney, who expressed concern about the growing global downside risks to growth. He also discussed the BOE's willingness to cut or raise interest rates depending on the outcome of Brexit negotiations. A large stimulus would likely be required if the U.K falls out of Europe he added, sending the Pound lower against the majors, AUD good value this morning at 0.5547. Services PMI for June is released this evening.
NZD
AUD/NZD is going nowhere at 1.0477, meanwhile Fonterra announced that the GDT price index was down 0.4%, milk prices being flat. NZD/USD opens at 0.6676 this morning.
Today’s data
AUD:
May Building Approvals, May Trade Balance
USD:
ADP Employment, Weekly Claims, Durable Goods, Factory orders
EUR:
Final Services PMI
GBP:
Services PMI
CNY:
Caixin China PMI & Services PMI