Currency Update - Thursday 5th September 2019
AUD
Another strong overnight session for the Aussie dollar as we open this morning to 2 week highs. Aussie was helped by GDP data hitting expectation despite a certain lack of confidence in the media leading us to 1.4% growth on the year. Overnight gains are being fueled by markets repricing the USD in light of growing pressure on the US Fed’s monetary policy. Despite this positive showing out of the Aussie Dollar don’t expect too much without more global appetite for risk.
USD
USD is quickly chalking up another losing day across the majors as it is being quickly sold off against the CAD, AUD, EUR and GBP. The losses to the looney came after the Bank of Canada kept interest rates on hold at 1.75% and provided almost hawkish commentary in its decision. There’s a fresh injection of risk that is weighing on the USD relative to its counterparts as we see some partial progress in Hong Kong and the UK. On the data front US trade deficit for August shrank down to $54b from $55.5b though this came as a miss on the expectation of $53.4m.
EUR
The beleaguered Euro has had some help in both data and a growing risk sentiment to see it recover some losses against the greenback. Final European PMI data for August was released and beat expectation which generated some bidding support. Some progress made in Hong Kong with Carrie Lam formally withdrawing the extradition bill and across the channel in the UK we saw a bill passed that would require the government to ask the EU for an extension should they fail to reach a deal with the EU prior to the October deadline. We also saw Italy’s Conte announce that he is able to form government and avoid the possibility of further elections. All together this has acted to reassure markets that the recent turbulence is temporary and risk assets may not be as untouchable as previously thought.
GBP
Pound Sterling news or perhaps more accurately of late described as Brexit news comes with a significant development today as Boris absorbs his latest defeat, this time in the House of Commons. A bill that would see the UK government ask the EU for an extension if it is unable to come to terms with the EU prior to the October deadline has passed. The bill has now graduated to the House of Lords who are bracing for a long period of debates over the bill and the 86 amendments that have since been made to it. All in all the markets have digested this move and it appears as if the following is now true: anything that moves the UK away from a no-deal Brexit is good for the value of the Great British Pound. GBP made strides against the USD and EUR as the political drama unfolds. Some mixed results on the data front with UK Services PMI fell to 50.6 in August, below expectations of 51.0 and the Composite PMI fell to 50.2, falling short of expectations of 50.5. UK Retail Sales has solidified into a 2.2% year on year gain which so far exceeds expectation of a 2% gain.
NZD
The NZD’s suffering continues as the country’s trade balance took a nosedive in July as New Zealand posted a massive trade deficit of 685m NZD – the first deficit since January. ANZ Business Confidence indicator fell to -52.3 down from -44.3 a month earlier. All in all the bitter winter for the NZD which has fallen 6.7% since mid-July. With the Kiwi struggling to get up while mired in a strong bearish channel it will certainly need some strong data and improved global conditions to start the road back to recovery.