Currency Update - Tuesday 17th September 2019
AUD
Yesterday’s weak Chinese industrial production and retails sales numbers, along with the specter of armed conflict in the aftermath of the weekend’s Saudi Oil Asset attacks have stemmed upside for the AUD. The RBA releases its meeting minutes this morning at the same time as the House Price Index numbers for Q2 are released. The RBA has shown itself to be relatively optimistic, recognising global uncertainty but also saying they expect growth to strengthen gradually to around trend. They’ve also noted upward pressure on wage growth and signs of a turnaround in the housing market that should support spending. If there is a notable change in tone or worse, a direct indication that further easing is imminent, the AUD will take a knock.
USD
AUD opens at a familiar level as markets await the Fed’s interest rate decision tomorrow night where a 25 basis point cut is expected. The US/Iranian tensions however are threatening to overshadow the Fed, safe haven flows and equity market losses the result of the turn in risk sentiment. The US and UK both announced that they would support Saudi Arabia to effectively respond to the attacks while US President Trump said that it looked like Iran was behind the attack and while he did not want war, the US military was ready. No data from the US tonight.
EUR
AUD slightly higher this morning against EUR at 0.6240, benefitting from a weaker EURUSD. Data from the Eurozone kicks off tonight with German ZEW Economic Sentiment.
GBP
AUD slightly higher here also this morning with the GBP faltering on Brexit headlines. The EU chief negotiator Juncker said that talks with Johnson were “good”. The Luxembourg PM was not as positive however, saying that any Brexit delay needed to be justified and called on Johnson to use the time wisely as the position of the EU had not changed in that the current deal was the best possible. He added that there were no concrete proposals from the UK to change the deal. The stalemate continues as the current deadline approaches.
NZD
AUD continues to gain on NZD, opening this morning at 1.0820 for fresh ten-month highs. The divergence between AUD and NZD could be attributed to the RBA’s relatively optimistic outlook compared to its counterpart in the RBNZ (which recently chose to cut rates by 50 basis points). Today’s RBA monetary policy meeting minutes offer an opportunity for markets to reassess the RBA’s mood. Kiwi GDP on Thursday morning will be a factor, compounded by local employment data which is due to follow shortly thereafter.