Currency Update - Tuesday 20th August 2019
AUD
With little on the data front to digest, markets are firmly focused on geo-political happenings and their impact on risk sentiment. To trade wars, and US Treasury Secretary Wilbur Ross announced overnight a 90 day reprieve on the proposed ban on some of Huawei’s activities in the US. The delay saw a sharp spike in optimism as the market finally saw some thawing in the frosty negotiations between China and the US. The China rate fix (11.15am Sydney time) will be watched closely today for any concessions from China in response to the reprieve in Huawei’s ban. On the data front, and the RBA minutes from their August meeting at which it left rates unchanged at 1.00% are released today, although several speeches from key RBA members in the period since should soften any movement.
USD
AUD opening in a familiar range albeit at the lower end, trading at 0.6767. The Fed’s Rosengren was typically hawkish as he said that the US economy is in a pretty good spot and it was the strength in July that led to him dissenting as rates were lowered. He said that there are costs to easing if you don’t need to act and that now is a good time to sit back and look at the economic data. The USD firmed marginally on the back of these comments, perhaps the Fed won’t be employing a sustained easing cycle seen with other central banks around the world? Trump took to his favourite medium as he tweeted about “the horrendous lack of vision from Jay Powell and the Fed”. He called for 100 points of cuts and possible quantitative easing, however currencies largely ignored this tweet. No data from the US tonight, however there is more Fed speak.
EUR
AUD still holding on to the 0.61 handle this morning after more tight ranges overnight. Headlines from the Bundesbank that suggested there was a risk the German economy would contract in Q3 and enter a technical recession. Later also headlines that Germany was preparing stimulus measures as a contingency for crisis saw the EUR edge ahead slightly. Finally ECB’s Rehn from the pulpit saying that stimulus is needed to ensure financial conditions remain favourable and to support growth. No EUR related data this evening.
GBP
AUD opening almost exactly at yesterday’s levels – 0.5577. Numerous Brexit headlines overnight including that the UK had significantly stepped up no deal planning. Johnson also again repeated the statement that the UK would leave the EU on October 31 with or without a deal and ahead of a meeting with Merkel and Macron, said that it was up to the EU to compromise. Boris Johnson also wrote a letter to Donald Tusk of the EU saying he wants to leave with a deal but that the backstop cannot form part of the agreement. Boris is certainly bringing an ostentatious style to his Brexit strategy, but little reaction from currencies to what is becoming well-worn rhetoric. No data tonight.
NZD
No movement here, AUD opening at 1.0551. NZD is however approaching key support against USD at 0.6400, a break of which could see a run lower with last week’s post-RBNZ lows in view. No data from across the ditch today.
Today’s data
AUD:
August Monetary Policy Meeting Mintues
USD:
No data
EUR:
No data
GBP:
No data
NZD:
No data
CNY:
No data