Currency Update - Tuesday 24th September 2019
AUD
A fairly flat day of trading for the Aussie Dollar in the absence of major news and data. The Aussie’s fate is being determined by risk sentiment and in the wake of the most recent row between China and US this sentiment has turned on the AUD. Trump’s most recent comments were that the United States was looking for a “complete deal” with China, not a partial one. We have Governor Lowe speaking this evening and certainly our disappointing unemployment figures from last week will be a factor for him. Markets will be analyzing his choice for words for insights into future monetary policy so prepare for some possible movement later this evening - we're only one week away from the next RBA interest rate decision and markets are adjusting the chances of a further 25 basis point cut.
USD
The USD has seen some a small resurgence of strength after a strong PMI manufacturing data print and weak European data. We saw US equities post some small gains and heavy selling of the Euro. In contrast, the Aussie Dollar managed to hang on to its current level and was restricted to a tight 16-point trading range. The recent risk off sentiment pervading markets off the back of US-China tensions has been a source of strength for the USD and source of difficulty for the Euro and AUD. Moving forward we’ve got CB Consumer Confidence out early tomorrow for the USD in the absence of news, expect trading to be largely sentiment based.
EUR
The Euro is in the cross hairs of the bears after Germany and France printed some underwhelming PMI figures. Outgoing ECB President Draghi offered little new information in his testimony to the EU parliament. He stressed that monetary policy needed to remain accommodative for a prolonged period of time due to weakness and uncertainty, particularly in regards to trade. He went on to say that inflation was subdued and that the ECB was ready to adjust all instruments as required. When all was said and done, the Aussie Dollar did make some small gains but the rally was fairly muted. Moving forward there will be little appetite for neither AUD nor EUR until risk sentiment changes.
GBP
Aussie’s recent run up against Pound Sterling is slowing to more of a crawl as risk appetite comes off. There has been some selling pressure on the GBP after Irish PM Varadkar announced a meeting with UK PM Boris Johnson to stress the importance of Ireland’s border issues with the UK in the event of Brexit. Varadkar went on to say that Ireland will require a legally binding assurance that there will be no hard border and that he will not accept what he described as a “halfway-house". Without a more substantive Brexit update, this injection of political uncertainty put more offers on GBP and the Aussie Dollar saw some small benefit. With the current risk sentiment heavily skewed against the Aussie Dollar however our upside is limited.
NZD
The Kiwi Dollar has put together a mini-rally against the greenback this week after touching the lowest level since September 2015. Since then it’s put together a 0.56% rally which is an impressive showing in the absence of any major data or news. With the risk sentiment heavily weighted against the Kiwi Dollar, this rally against the greenback comes across as something of a technical correction to recent overselling. Moving forward our attention shifts to the RBNZ which is expected to leave rates on hold but will hopefully provide some further insight into future monetary policy decisions.