Currency Update - Thursday 9th January 2020
AUD
A sense of calm returned to markets overnight after US President Trump toned down the
aggression toward Iran and suggested any further military action may not be
required. President Trump addressed the US saying that there were no casualties
and limited damage from the Iranian missile strikes. He also noted that
additional sanctions would be imposed and that Iran was standing down and
called on other countries to “break away from the remnants of the Iran nuclear
deal”. Equities responded well to the news with risk coming back into the
market and helping Wall St to rally. The Australian housing market stands to
see some relief with a lift in Building Approvals from November which saw total
dwellings approved rising 11.8%, smashing the forecast of +2.1%. Ahead today we
have the first major bit of economic data out of Australia with the balance of
trade out later this morning. With risk coming back into play a better than
expected trade balance should help importers get closer to the elusive 0.70 handles.
USD
With the Iranian
standoff seemingly at an end there was some expectation that the AUD may be
poised to bounce back after the recent week’s downturn. However, the bids were
slow to come by with for the Aussie Dollar with markets trading AUD/USD at
0.6867 at the time of writing. Favourable US employment data quickly put the
Australian Dollar on the backfoot and limited any upside move off the back of
the Iranian conclusion. This sideways movement is perhaps a good outcome for
importers given that the US ADP Employment report for December showed that 202k
jobs were added to the US economy. This easily beat expectations of 160k while
the November number was revised up from 67k to 124k. The greenback firmed off
the news which helped keep the Aussie pinned and trading sideways.
EUR
News that the US and Iran would not be heading into an escalated military conflict came as welcome
news for both the Australian and Euro bulls. However weak data out of the
Eurozone ensured the Australian Dollar would get the better of overnight
trading with markets trading AUD/EUR at 0.6183 at the time of writing. German
factory orders fell by 1.3% in November with the French trade deficit slightly
wider than expected. EZ consumer confidence for December was unchanged from the
initial reading at -8.1. ECB President Largarde also provided some commentary
on the wires saying that the biggest threat to the economy was a downturn in
trade while a concerted EU fiscal stimulus would help growth. On Brexit she
noted that a trade deal would be the biggest challenge. The less than inspiring
commentary on the European economy encouraged the bids that came in for the
Australian Dollar and, in the absence of any other major news today should keep
Euro weak for the rest of the day.
GBP
As risk quietly creeps back into markets the Australian Dollar has lifted slightly against Pound
Sterling with markets trading at 0.5241 as we open this morning. A quiet week
for the UK without elections, Brexit nor any major economic data set for
release. AUD/GBP has reflected the absence of news with markets trading
relatively flat and largely dictated by sentiment and we should see this
continue to finish up the week.
NZD
The New Zealand Dollar continues to put up runs against the Aussies with markets trading
AUD/NZD at 1.0326 at the time of writing – six-month lows. Concerns of an RBA
move to QE have helped the NZD bulls get the better of trading in the absence
of major news. Ahead today we have ANZ Commodity Prices as the lone piece of
NZD data that could help Aussie consolidate in the event of a miss.