Currency Update - Tuesday 18th September 2019

AUD

The Australian Dollar opens flat this morning against the USD after dipping on the back of dovish monetary policy minutes out of the RBA before recovering in the overnight session. Whilst not containing much actual new developments, the meeting minutes noted that “developments in the international and domestic economies, including the labour market” will be part of the equation to determine their next monetary policy decision. Markets interpreted this as of a dovish tone and this created some selling pressure on the AUD. We have local jobs data due tomorrow, so if we miss here expect some downside movement in the Aussie Dollar as markets reprice the likelihood of a rate cut in October.

USD

USD weakness was evident overnight ahead of tonight's FOMC decision with the expectation that the Fed will make a 25 basis point cut with an additional, similarly sized cut before the end of the year. While the US posted some solid industrial production numbers in august the US Dollar Index fell 0.4% as traders take profits ahead of the FOMC. There is some risk of a 50-basis point cut which may be scaring traders however with US-China trade talks resuming in October this may discourage an overly dovish approach out of the Fed.

EUR

Relatively quiet day for the Euro ahead of some big data tonight. German ZEW survey came in mixed with the current situation printing weaker while expectations bounced back higher. The Euro quietly traded higher against the USD aided by a soft USD ahead of the US Fed’s monetary decision.

GBP

Pound Sterling endured something of a mixed session with some ups and downs across the majors, stronger against the AUD. Initially GBP was suffering with some selling pressure as markets digested comments from the Luxembourg PM Bettel who reiterated that the EU won’t extend the Brexit deadline “just for the sake of another extension”. However, some USD weakness saw Pound recover some of the losses posted against the greenback as the US Fed’s rate cut decision dominates traders’ attention.

NZD

The NZD has stayed in positive territory against the USD supported both by upbeat GDP price index data and the beginning of FOMC day. Some worries about Saudi oil production were assuaged as reports came in that oil production would not be materially harmed and that 50% of production had already been restored. This helped reassure markets and gave some additional support for the NZD. All eyes will be on the FOMC now so don’t expect too much movement between now and tomorrow morning. After the Fed's releases, Kiwi GDP for Q2 is due early tomorrow morning and could also knock the NZD about.