Currency Update - Thursday 10th October 2019
AUD
The Australian Dollar opens this morning slightly lower against the majors as we continue to trade fairly flat in the absence of any major news or data announcements. There is some positive sentiment driven by increased optimism surrounding the US-China trade negotiations though this hasn’t translated to bids for the Aussie. Westpac Consumer Sentiment was a big miss for the Australian Dollar yesterday, posting the lowest level for the Index since July 2015, and this has helped insulate the Aussie Dollar from the positive sentiment seen in other markets such as US equities. Moving forward we have some minor releases in the form of Home Loans and MI Inflation Expectations this morning before it heats up on Friday as China releases data on New Loans.
USD
The Aussie Dollar opens this morning weaker against the USD, hitting the bottom of the recent trading range as we touch 1-week lows of 0.6723. Improving risk sentiment is coming back into certain markets with the S&P and NASDAQ both up 1.2% while US 2 and 10 year yields both moving higher by 5 basis points. We’ve seen sentiment boosted by claims that China is open to a US trade deal despite the tech blacklist. Adding to the positivity, the Financial Times reported that China is willing to up their purchases of US agricultural products by $10B to assist in the negotiations. We did see the Aussie Dollar make a small run off the back of this however selling pressure quickly evaporated any gains made. Powell made some upbeat comments about the US economy however he also left the door open to another rate cut this month, citing global risks. We’ve got some big data tonight with month to month USD CPI releases that will have the most impact on US Fed monetary policies.
EUR
The Aussie Dollar has fallen to a 1-week low of 0.6125 against the Euro as it attempts to consolidate following a small overnight drop. In Brexit news the EU made a significant concession to the UK by allowing a double majority in the Northern Ireland assembly to leave the new Irish backstop after an as yet unspecified number of years. This presents a possible turning point in UK/EU Brexit negotiations as it comes as the first major change since the negotiations stalled with Theresa May at the helm. We have the ECB Monetary Policy Meeting Accounts coming out tonight and this should provide some further insight into the current state of the broader European economy.
GBP
Pound Sterling can chalk up a win for the bulls as markets heard that the EU was willing to make some Brexit concessions which helped push GBP higher across the majors and pushed Aussie down to 0.5507 at opening. It wasn’t without some controversy as DUP’s Donaldson advised that the party would clearly oppose the reported EU compromise on the double Irish majority. Juncker and Barnier weighed in, commenting on Brexit that in spite of some EU concessions the current UK offer was still not acceptable. They stressed that a deal was still possible and the EU would work towards such an outcome. Without further details of what Boris and co are actually asking for, it remains to be seen whether a deal is likely or not at the 11th hour of Brexit.
NZD
The Aussie Dollar made some small gains overnight touching a high of 1.0693 before coming off. The Aussie and Kiwi has been trading fairly flat against each other this week, taking turns making runs up and down but staying in a fairly compact trading range. Tomorrow we have the Business NZ Manufacturing Index coming out for the Kiwi Dollar so expect to see some movement if the Kiwi can post some strong results.