Currency Update - Tuesday 25th September 2019
AUD
The Australian Dollar is on the rise this morning after an optimistic economic update from RBA Governor Lowe. Lowe took a glass half full approach as he said that “there are some signs that, after a soft patch, the economy has reached a gentle turning point”. He cited the impact of recent interest rate reductions and tax cuts, as well as ongoing infrastructure spending as reasons for optimism. Lowe continued to say that the Board will be taking stock of the evidence and taking further action if necessary. The markets reacted quickly to the comments and the expectation of a rate cut in October dropped down to 75%. The bulls were happy with the timing of Lowe’s comments as it coincided with some USD weakness off the back of some weak Consumer Confidence data which helped push the Aussie up against the USD.
USD
The impeachment process has formally begun with Nancy Pelosi launching an inquiry into the Ukrainian-Biden incident. Democrats claim that President Trump attempted to geopolitically extort the Ukrainian president into providing dirt on leading Democratic nominee Joe Biden. Trump has predictably denied any and all wrongdoing. The USD has remained largely unaffected thus far but it will certainly become a factor moving forward in the broader context of US-China trade negotiations. We did see some USD weakness however that is primarily motivated by a miss in US Consumer Confidence. In addition, we also saw the Richmond Fed Manufacturing Index taking a miss in September. The USD GDP figures quarter to quarter are out tomorrow so that will take the spotlight this week.
EUR
Euro has remained in a very narrow trading range with little news or data to help push it in one way or another. German IFO survey came in slightly above the forecast at 94.6 but did little to influence markets. Lowe’s comments helped push the Aussie slightly higher against the Euro but the overnight session saw some of these gains erased. We open marginally higher than yesterday’s highs and expect another flat day of trading.
GDP
Boris Johnson’s best efforts to lead the UK have taken yet another problematic detour. The UK Supreme Court has ruled that the Prime Minister’s PM’s advice to the Queen on prorogation was void with the suspension of parliament unlawful. Common’s speaker Bercow said that the House of Commons must convene without delay with opposition leader Corbyn calling for an election. Markets took the news as another sign that a no-deal Brexit is increasingly unlikely and Pound Sterling firmed up against the USD and AUD.
NZD
The USD weakness stemming from a couple of missed data points has given the Kiwi a leg up. The NZD is coming up from the floor of recent daily lows as traders await news from the RBNZ today. The expectation today is a hold and a cut later in November. If the RBNZ decides to buck that expectation and take another cut now expect an immediate unraveling of NZD.