Currency Update - Friday 20th September 2019
AUD
The Aussie had a difficult day yesterday after a less-dovish sounding FOMC and the local Unemployment Rate ticking higher to 5.3%. This prompted a sell off that pushed the Aussie Dollar down before finding a bottom nearly 60 basis points lower than prior to the FOMC decision. The unemployment data was a nasty miss because it gives a greenlight to the RBA to cut rates again in October. We did make back some of the losses against the greenback in the overnight session after a fairly flat USD performance. We’ve got no big data between now and Tuesday when Governor Lowe speaks where certainly the miss on unemployment will be a topic of discussion.
USD
The USD had a relatively subdued session overnight with mostly flat performances seen in all three major US equity indices while US yields went marginally lower. Some trade pessimism has crept up coming from a tweet from the Chief in Editor at the Global Times who commented that “I know China is not as anxious to reach a deal as the US side thought”. Predictably we heard from the White House where Michael Pillsbury, the chief China advisor to the President, said that the president is ready to escalate the trade war if a deal is not agreed upon soon. If the trade war kicks off again with new rounds of tariffs on both sides, expect all risk appetite to be sucked out of the market and the USD should regain the advantage due to its safe-haven properties.
EUR
The Euro took a knock against the USD after the FOMC decision but has seemingly found a bottom. With a concerning geopolitical situation in the Middle-East and some pessimistic trade chatter between the US and China, the Euro is under threat of further selling pressure. If we do see any kind of escalation in either the Middle-East or the US-China trade war, then we should expect to see risk to be taken out of the market and the Euro to fall accordingly. Euro posted its biggest losses against Pound Sterling after news came out from Juncker that a Brexit deal could be reached. No big data or events today so don’t expect too much movement out of the Euro as we head into the weekend.
GBP
The Pound is on the front foot after some hopeful Brexit news. The EU’s Juncker said that he thought a Brexit deal could be reached and that if the objectives of Irish backstop are met through other alternatives then it would not be needed. Some optimistic Brexit news will be always be well met by markets and Pound made some solid gains across the majors. Retails Sales hit expectation which undoubtedly came as a relief to the Bank of England which kept rates on hold yesterday as expected. No other big data news for the Pound today as we break for the weekend.
NZD
The Kiwi finds itself on the back foot again today as trade war fears creep back into markets. There’s been some pessimistic chat from the United States and China with Beijing warning the US not to mistake their recent kindness for weakness. If the trade war kicks off again expect some heavy selling pressure on the Kiwi as risk exits the market. Looking forward there’s not a lot of major drivers to keep an eye out for so Kiwi will likely end the week on a sour note.