Currency Update - Monday 30th September 2019
AUD
The Aussie Dollar continues to trade fairly flat against the major pairs ahead of the RBA rate decision tomorrow afternoon. So far markets have priced in an 80% likelihood of a 25 basis point cut. Such high numbers will create significant upside in the event of rates being kept on hold but given the most recent unemployment numbers this could be a long shot. The Aussie is also dealing with markets with little appetite for risk assets on account of US-China uncertainty. Most recently we’ve learned that the White House was considering limiting US private capital into China in addition to potentially delisting Chinese companies from US stock exchanges. These types of regulations and restrictions being discussed will crush risk sentiment up until we see a trade deal finalized and markets feel more comfortable. Chinese manufacturing data late this morning may offer something for traders to get their teeth into.
USD
China and the US are closing in on their trade negotiations next month but currently their relationship can be described as somewhat strained. China has reaffirmed its position stating that they will not be bullied and they intend to uphold the multilateral trading system and an open world economy. The United States meanwhile has considered several measures including restrictions to US portfolio flows and delisting Chinese companies from US stock exchanges. Risk predictably fell and Wall Street felt the pinch with a 0.5% loss for the Dow and S&P while the Nasdaq took a 1% tumble. Moving forward we have ISM Manufacturing PMI on Wednesday as the first big data event for the US this week.
EUR
Euro was another victim to the trade war related risk off environment. The US considering putting limits on american investors’ portfolio flows into china and delisting Chinese companies from the US stock exchange. Adding to the poor risk environment is more Brexit chaos with Boris Johnson claiming that he is looking to bypass the law recently passed making a no-deal Brexit illegal, and has no intentions of asking for another delay. Euro starts the week fairly flat against the Aussie but against the USD is trading near a fresh multi-year low.
GBP
There will be no delay to Brexit claims Boris Johnson in a televised interview. This comes as something of a surprise given that he is legally bound to do so as per the law passed by Parliament. His defiance is the latest in the ongoing political theatre that Brexit has become and, given his lack of explanation for how he might choose not to ask for a delay, seems slightly futile. Despite this, markets have reacted and there is deepening uncertainty over the outcome of Brexit, affecting risk assets and sending Pound Sterling lower against the USD. The Aussie Dollar found itself benefitting however and has extended its current streak up on the Pound to 10 days.
NZD
The NZD keeps bearing the burden of US Dollar strength as sentiment surrounging the trade war oscillates. Markets don’t like uncertainty and the longer and more protracted the trade disagreements become, the worse the situation becomes for currencies like the Aussie and Kiwi Dollar. Looking forward the NZD has a slew of second tier data that could, in combination, offer some reprieve and upside for the embattled Kiwi Dollar.