Currency Update - Friday 30th August 2019

AUD

At last we see some good news for the Aussie Dollar off the back of positive developments between US and China. The Chinese ministry for commerce have declared that they are keen to end trade war escalations and strike a deal with the US. This declaration comes with a warning that they will not be bullied by the US and further attempts by Trump to damage their economy will be met with their own economic retaliation. This breakthrough has improved risk sentiment across the board and the Aussie has already begun to see some benefit as it creeps up from yesterday’s lows. It wasn’t all good news of course as some negative data in the form of Q2 Private Capital Expenditure yesterday which missed expectation and created additional selling pressure on the Aussie Dollar. With that said, with China pulling back on the trade war it creates a much more positive environment for the Aussie and significantly increases upside trading potential. Moving forward we’re looking at July’s Private Sector Credit, Building Permits and HIA New Home Sales data to give the AUD some steam to stage a more prolonged comeback.

USD

With news of renewed China-US trade talks some risk has been removed from global markets, but with some positive US economic data overnight the USD still posted gains against Pound Sterling and the Euro. The US posted a jobless claims rate of 215,000 which was slightly ahead from the 209,000 recorded last week but inline with expectation overall the jobs market is still in good health. Moreover, GDP fell from 2.1% to 2% which again, was in line with expectation. The unpredictability of Trump does still remain a factor and in regards to China he commented that China played a “vicious” game in targeting US farmers in the trade dispute. Whether he will be an obstacle to a longer term resolution with China or not remains to be seen but undoubtedly we’ll be soon finding out via twitter.

EUR

More poor economic data out of Europe dominated the otherwise slow European news today. The Euro slipped slightly against the greenback after German CPI cooled from 1.1% to 1%, missing the expectation of 1.2%. The falling CPI rate suggests that demand is in decline which is a concerning signal for a country heading towards a technical recession. A softer inflation rate in the largest economic power in the EU will certainly be the topic of discussion in the ECB next month and may increase the likelihood of monetary easing in the near future. Outside of the poor data, Europe is benefitting from the reprieve that positive China-US news brings and creates further upside for recovery for the embattled Euro.

GBP

Pound Sterling opens today slightly lower against the greenback as the fears over a no-deal Brexit continue to brew. This time the anxieties are driven by Boris Johnson’s move to block parliament from his no-deal Brexit ambitions. Boris made the bold move to shut down parliament between mid-September and mid-October and this has spooked traders and spiked up the likelihood of a no deal Brexit. This certainly gives off the impression that Boris is continuing full steam ahead with no-deal Brexit while his opposing MPs scramble to find ways to stall and block his ambitions. Whether this is all just posturing in an attempt to strong arm the EU to accept an unrevealed Brexit deal remains to be seen but Brexit will continue to dominate the GBP news.

NZD

The NZD much like the AUD has benefited from the injection of risk appetite in global markets following the news over China and the US. The NZD has come off from the lows of yesterday and may be in position to stage a larger comeback assuming that economic data doesn’t scuttle those hopes.


Today’s data

AUD:

  • 11.30am Building Approvals m/m

USD:

  • Personal Spending, Core PCE Price Index m/m, Chicago PMI

EUR:

  • CPI Flash Estimate y/y

GBP:

  • No data

NZD:

  • No data

CNY:

  • Saturday Manufacturing PMI

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