Currency Update - Friday 3rd January 2020
AUD
Traders are still very much in risk on mode heading into the new
year as the US-China trade story continues to fuel the upbeat sentiment. Phase
one of the trade deal will be signed in the middle of this month, and the
feel-good factor is still circulating. Overnight, the People’s Bank of China
announced plans to cut the reserve requirement ratio by 50 basis points. This
would allow more money to be released into the Chinese economy and hopes it
will act as a stimulus has been seen favourably by markets, bolstering up
Australian Dollar strength. The Chinese manufacturing sector is still growing
albeit at a slightly slower pace as the Caixin survey cooled to 51.5 from 51.8.
A quiet day for Australian Dollar ahead with little data or news scheduled.
USD
The Australian Dollar has lost some of its momentum against the
greenback, slowly coming off since we bounced off familiar resistance levels of
0.7040 with markets trading just below 0.70. Another night of thin liquidity
saw the USD regain some of its recently lost lustre, as the DXY bounced off 6
month lows. The Aussie Dollar also suffered its biggest single day loss in over
seven weeks as the greenback attempts to reclaim some of its own recent losses.
US weekly jobless claims were modestly weaker than expected with initial claims
at 222k compared to forecasts of 220k while continuing claims were 1.728 mio to
come in higher than expectations of 1.680 mio. Little reaction to the data
though the USD initially pared gains a little in the aftermath. Ahead tomorrow we
have ISM Manufacturing PMI as the lone piece of USD data.
EUR
The Australian Dollar is pushing recent highs against the Euro
as we slowly creepy up with markets trading at 0.6260 at time of writing. Some
unimpressive manufacturing reports from the Eurozone did little to help give
the Euro some life with only the French manufacturing sector enjoying positive
growth. Spain and Germany exceeded their own forecasts but with the economic
powerhouse of Germany suffering from a manufacturing sector in deep contraction
there is little to encourage traders to put their bids in on the beleaguered
Euro. Quiet day of data ahead with little to report.
GBP
Pound Sterling has fallen off as Brexit fears weigh on the
currency and helping the Australian Dollar push higher with markets trading at
0.5320 at time of writing. Following fears of a likely harsh action by the
European Union if Boris Johnson attempts to play hardball during Brexit
negotiations Pound chalked up losses against the majors. The Financial Times
came out with the economist poll indicating that such an outcome will weigh
heavily on the UK GDP and this was enough to prompt traders to start trimming
their Pound positions. On the data front there was little reaction to the
mildly upbeat manufacturing data with UK manufacturing PMI coming in at 47.5,
beating forecasts of 47.4.
NZD
The Kiwi Dollar is down slightly against the Australian Dollar
with markets trading at 1.0431 at time of writing. The Australian Dollar just
edged out the Kiwi Dollar following market reactions to the Chinese stimulus
announcement. No data to finish up the week.