Currency Update - Wednesday 28th August 2019
AUD
The calm and smooth recovery of the AUD has hit choppy waters following renewed uncertainty over US yields and the trade war. Following a quick reversal yesterday after what appeared to be progress between Trump and Xi, the AUD ran into familiar resistance levels and turned south. This erased much of yesterday’s gains and we open today in the doldrums that have defined the month of August. The uncertainty that weighs so heavily on the AUD has been fueled not only by concern over the veracity of Trump’s statements but also signals of a slowdown in Germany – the EU’s largest economy.
USD
The risk off sentiment has wracked Wall Street of late and adding more difficulties is the inversion of US bond yields. When US bond yields invert it refers to the yields of the 2 year US bonds exceeding those of the 10 year ones which has been often looked at as an indicator for a global recession. Despite this, the USD remains one of the world’s principal safe haven currencies and therefore has made ground on its riskier counterparts. The data supported the USD as well with upbeat consumer confidence and manufacturing activity. Next up will be Construction Work Done data which will be in focus to determine whether we’ll see continued gains across the majors or not.
EUR
Currency markets started the day in a rather subdued fashion with the euro trading in a ten point range in Asia as investors hold their breaths waiting for new developments coming out of the US-China trade war. The EUR came under some selling pressure following confirmation that Germany’s Q2 GDP contracted 0.1%. With the EU’s economic future looking bleak, if there is to be a sustained recovery in the value of the beleaguered Euro then real progress must be made in the trade war.
GBP
Pound sterling is one of the few currencies that has sustained a prolonged rally on the USD in August and fears over inverting US bond yields have done nothing to change that trajectory. The pound has been helped most recently off the back of reports that a caucus of MPs including Jeremy Corbyn is looking to formulate a plan to prevent a no-deal Brexit. Perhaps more importantly, the EU commission has stated that they are willing to work with the UK on Brexit if suitable propositions are put forward. Despite this the fear remains that the only real way to prevent a no-deal Brexit is to revoke article 50 otherwise their fate will ironically be determined by Brussels and their decision over to provide yet another extension to the politically divided UK. Brexit will continue to dominate GBP news as we edge closer to the fateful October 31st date and the answer to whether Britain will or will not leave and if so, in what manner.
NZD
Without any good news relating to the US-China trade war the NZD has remained on the back foot sliding marginally back during Asia’s trading session. With strong US data and a decidedly risk off global sentiment, there is little to assist the NZD in pushing higher until we see some trade cessation and/or more positive economic data.
Today’s date
AUD:
11:30 AM Q2 construction work done
USD:
No data
EUR:
German September consumer confidence
GBP:
No data
NZD:
No data
CNY:
No data