Currency Update - Friday 22nd March 2019
AUD
After a stellar run higher for the AUD in local trade yesterday, following the dip to the Unemployment rate from 5% to 4.9%, the momentum was lost and the Big Dollar reclaimed much of that ground overnight. AUD/USD traded to highs of 0.7164 during our session and this despite the labour market adding a mere 4.6K new jobs against an estimate of 15k. Full time employment actually declined by 7.3k jobs so the aggregate rise was driven by the part time market. The AUD was buoyed as the consensus was for the rate to remain flat, the fall places Unemployment at an eight year low despite the addition of 4.6k in new jobs being the weakest print in 12 months. The average increase in new jobs for the prior six months has been 48k so the weak number suggests the labour market is beginning to falter, despite the headline unemployment rate. If, and when, the unemployment rate begins to kick back up, the RBA will be forced to begin further loosening of their monetary policy. Overnight AUD/USD dipped back below 0.71 on a resurgent USD, hitting lows of 0.7090 but we open this morning having regained the handle at 0.7115. PMIs to print today both locally and around the globe, the big dollar may well finish the week strong! Support is now at the overnight low of 0.7090, resistance forms at the mid 0.71 levels.
USD
The greenback regained its mojo overnight following on from strong data, a decline in commodities, risk reversal and reflection on the AU labour report. In DXY terms the USD made gains of 0.41% to close at 96.33 cutting short the USD sell off. Brexit news and the resulting sell off of the GBP gave the USD a bid tone on safe haven plays and investors short term memories seem to have already forgotten the FOMC comments. Data wise the Initial and Continuing Jobless Claims were both a beat; Initial claims trimmed back to 221k from the previous 230k and beat their expectation by 4k, Continuing claims fell to 1750k from 1777k and also beat their forecast, this time by 18k. The Philly Fed Business Outlook was also upbeat, rising to 13.7 from a negative -4.1 and smashing expectation of 4.8. The USD was well bid and forced the Antipodeans lower throughout the offshore sessions on risk reversal, can the big dollar keep the momentum? Traders will no doubt be analyzing the latest Brexit news and the risk it brings, the USD is the benefactor when risk appetite is removed so will potentially end the week on a high. PMIs, Existing Home Sales and the Monthly Budget Statement the highlights to close out the data calendar for the week.
EUR
European stocks lagged U.S bourses overnight, with the exception of the MIB. The Euro retreated from Thursday's highs against the USD, opening sub 1.14 this morning. The AUD remains stubbornly low in the mid 0.62's. Brexit messiness continues (more below), it was another quiet European session for the most part, a lack of data and USD strength the main factors effecting the Euro overnight. Yesterday's local employment numbers gave the AUD a temporary boost, with the unemployment rate falling below 5%. Tonight sees the release of EU Flash PMIs, there are a few early signals the economic data maybe improving in the EU, so we'll be keeping an eye on the these results. It should be a quiet end to the week for volatility.
GBP
Retail Sales in the U.K jumped by 0.2% in Febraury, beating estimates of a 0.4% decline. The Pound rallied on the result, but was sold heavily after the EU pushed back on the terms surrounding May's request to delay Brexit until the end of May 2019. Headlines were relleased stating that the EU required a successful Parliamentary Withdrawal Agreement Vote for any Brexit extension to be approved. The BOE then left rates on hold, it was a unanimous vote. In the statement the MPC board noted that rates would likey need to the tightened gradually with underlying inflation close to forecast and with better than expected growth expectations. Reports then surfaced that the EU would agree to a 9 month extension if May's deal was defeated in parliament. GBP/USD volatility was extreme, AUD/GBP didn't see what all the fuss was about, with a slow climb to 0.5425
NZD
The Kiwi fell from 0.6940 in the wake of USD weakness, to fall back to 0.6876 this morning. Yesterday's Q4 GDP printed at target (0.6%), USD strength took over in the overnight session, NZD still remains well bid however. Flash PMIs tonight are released in the U.S, all in all it should be a quiet end to the week for the Kiwi.
Today’s data
USD:
Home Sales, Flash PMI's (March)
EUR:
EU Flash PMIs (March)