Currency Update - Wednesday 8th January 2020

AUD

AUD remains under pressure across the board; commodity
currencies and risk assets both hit hard by the simmering tensions in the
Middle East. Overnight and Iranian news agency reported that Iran is assessing
13 retaliation scenarios against the US and went onto say that the weakest
retaliation scenario will cause a historic nightmare. So far oil has drifted
only marginally lower and equities haven’t reacted adversely, however expect
this to change quickly if escalation occurs, currencies to also make more exaggerated
moves with AUD heading south. The local economic data starts today with
Building Approval numbers due, an increase of 2.1% expected for December.

USD

AUD continues a heavy start to 2020, opening at 0.6865 this
morning after losing more ground in the face of the Iranian conflict. Strong US
data overnight adding to general USD strength, the ISM Non-Manufacturing PMI
printing a 55.00, the strongest reading since September last year. Plenty of US
data still to come this week; ADP Employment numbers due tonight before Friday
night’s official employment numbers are released.

EUR

In a familiar theme, AUD opens lower here at 0.6159 this
morning. Overnight European equities were mixed and the data was also neither
here nor there (EZ CPI Estimate coming in on expectations at 1.3%), so the move
lower is probably attributable to AUD weakness related to investor caution of
escalation in the Middle East. There’s only low-impact data due from the EZ
tonight.

GBP

AUD opens lower at 0.5233 this morning, suffering hard in the
aftermath of the US attack on Iran late last week. Economic data from the UK is
sparse this week, tomorrow night’s speech by BoE Gov Carney the only event of
note. In the short term, movements here to be dictated by risk sentiment and
the local data releases. Brexit news has been thin so far, however this will
prove temporary.

NZD

AUD continues to lose the battle of the Antipodeans, plumbing
5-month lows this morning at 1.0337, the August low of 1.0259 is in sight. This
morning Fonterra announced the details of their latest dairy auction with the
GDT Price Index rising by 2.8% while Whole Milk Powder Prices rose by 1.7%.
Kiwi data is thin for the remainder of the week, local data releases to be the
focus.