Currency Update - Tuesday 6th August 2019

AUD

Global risk and trade wars are continuing to weigh heavy on risk assets, including the AUD. Local stocks are set to open lower after US stock markets had their worst day of 2019, the three major US bourses all falling by more than 3%, oil by 2%, and the VIX (known as the risk index) skyrocketing by 33%! The Chinese Yuan (CNY) broke higher through the technically important 7.00 level against the USD, which attracted the ire of Trump (via twitter of course), accusing them of currency manipulation and unfair trade practices that resulted in them “receiving hundreds of billions of dollars”. After yesterday’s bank holiday, the RBA is likely to leave the cash rate unchanged at 1.00% today after two consecutive cuts. Governor Lowe will maintain an explicit easing bias given his recent comment on 25 July that “if demand growth is not sufficient, the Board is prepared to provide additional support by easing monetary policy further”.

USD

The friendless AUD opens lower at 0.6753 against USD this morning, levels not seen since the ‘flash crash’ back in January and over 3 ½ years before that. Trade wars are really starting to bite hard on AUD with the recent US/China ‘truce’ lasting only a couple of weeks before the resumption of hostilities and the AUD falling almost 5% against USD in less than three weeks. Slightly weaker US data overnight with ISM Non-Manufacturing PMI (53.7 actual vs 55.5 expected) wasn’t enough to offer respite against the rampant USD. With only mid-tier US releases on the economic data calendar this week, focus will be on Fed speak (when will the Fed cut rates?) and Trade Ware developments. AUD support sits at 0.6743 (the flash crash lows from January).

EUR

AUD opens at 0.6020 against EUR, levels which, flash crash aside, haven’t been seen since Sept 2009. EUR data was mixed overnight; PMIs for Italy and France ahead of expectations and Spain and Germany missing expectations. AUD’s decline against EUR more of a reflection of risk sentiment than underlying EUR strength. Data from the Eurozone is light on the ground this week, support for AUD lying at the psychological 0.6000, before the flash crash lows of 0.6588.

GBP

AUD opens lower at 0.5565 against GBP, despite a glorious win for the Aussies cricketers in the Ashes, pasting the Poms by 251 runs at their favourite ground. UK Services PMI beat expectations overnight (51.4 actual vs 50.4 expected) and with last week’s busy week in the rear view mirror, a slower week of data ahead leading up to the highlight in Friday’s GDP numbers. Brexit developments will also no doubt play a part in the mix with less than 100 days to go until the 31 Oct deadline.

NZD

AUD opened at 1.0370, however has just dropped to 1.0283 at time of writing on the back of extremely shiny employment data from across the ditch; Employment Change q/q printing at 0.8% (smashing expectations of 0.3%) and the Unemployment Rate dipping heavily to 3.9% to equal the 10-year lows. The data isn’t done for the day, with Inflation Expectations due this afternoon. Tomorrow the RBNZ will also deliver their interest rate decision with a 25 basis point cut expected.


Today’s data

AUD:

  • 2.30pm RBA interest rate decision

USD:

  • FOMC Member Bullard speaks

EUR:

  • No data

GBP:

  • No data

NZD:

  • 1pm Inflation Expectations

CNY:

  • No data

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