Currency Update - Wednesday 15th January 2020

AUD

China-related events are taking center stage in our region this
week in the absence of domestic economic data points. Trading ranges for AUD
have been tight across the board, yesterday’s strong Chinese trade figures
weren’t enough to buck the trend, despite the strong link to Australia’s trade
fortunes (we ship two-thirds or our goods to China!). Tonight the US/China
phase one trade is due to be signed in Washington, paving the way for
negotiations to begin on phase two. Limiting the sense of positivity and
therefore AUD upside, news overnight circulated that tariffs on China won’t be
lifted until late this year, once Beijing’s adherence to the terms of the phase
one deal can be assessed. The focus on China continues later in the week with
its GDP numbers on Friday, no domestic data to speak of.

USD

AUD has traded a tight 25 pip range over the last 24hrs, opening
at 0.6904 this morning. AUD unable to capitalise on another disappointing US
data release with Core CPI m/m showing a 0.1% increase and missing the expected
0.2% increase. Services inflation (which makes up 60% of the CPI) showed a
decent increase, however it was weakness in airfares and used car & truck
sales which retrained overall growth. Tight ranges to persist at least
throughout today, there is some Fed speak due tonight along with the signing of
the phase one trade deal.

EUR

AUD opens just above the 0.62 handle this morning in what is a
lethargic trading environment. No European data to speak of last night and
again tonight. Thursday night’s ECB Monetary Policy Meeting Minutes and ECB
President Lagarde’s speech might add some spice but don’t expect large moves
here.

GBP

AUD opens slightly lower today at 0.5297, with markets poised to
digest the UK CPI y/y later this evening. This release holds extra relevance
considering Governor Carney’s recent admission that the Bank of England is
currently debating policy easing. MPC Member Saunders is also due to speak
shortly thereafter, markets hungry for clues on interest rate directions as
always.

NZD

AUD is mounting a small fightback against NZD, opening at 1.0434
this morning. Yesterday’s Building Consents number showed an increased
contraction of 8.5% which opened the gate for the AUD gains. Kiwi business
confidence numbers, whilst improved, continue to be pessimistic.