Currency Update - Tuesday 14th May 2019
AUD
The AUD did it's best to hold onto support at 0.6960 last night, market forces were too strong however as China responded to Trump's increased tariffs with it's own punitive trade measures. Risk aversion flooded markets, stocks were sold and the AUD fell to a low of 0.6940. The AUD was already on shaky ground yesterday after the release of weak mortgage credit data. Home loans fell -2.5% (2.5% exp) in the month of April, signaling that that property prices have further to fall. The JPY went bid, gold rallied and oil eventually sold off despite a skirmish in the Hormuz Strait. The new escalations could well be met with more Trump induced tariffs on a further $300bn of Chinese made goods. Investors are nervous, equities tanked close to 3% in the U.S overnight, ASX futures fared better falling 0.75%. NAB Business Confidence is released today at 11:30. The employment sub index will be important, as well as the latest read on business profits etc. With downside support now broken apart, 0.69 U.S cents is the next level of meaningful support, past there is the flash crash lows of 0.6740. Pressure to continue on the local unit over the coming sessions, resistance at 0.70 U.S cents.
USD
Focus was squarely on the U.S/China trade spat overnight. China retaliated to Trump's decision to increase tariffs last week, by announcing their own set of tariffs on $60bn of U.S goods. The Chinese paper the Global Times tweeted further threats that China may stop purchasing U.S agricultural products and energy, whilst reducing Boeing orders and restricting service trade. U.S equities were dismantled on the escalation, the major indices falling around 3-3.5%. Commodity markets were softer, with copper and oil lower. The U.S then added six new Chinese companies that are banned from exporting sensitive US technologies. You can see which way this is going! The USD index was initially weaker, but managed to recover, closing at yesterday's opening levels of 97.35. Most major and minor currencies open lower against the USD this morning, USD/CNY jumping over 6.9 for the first time in a while as pressure mounts on China's economy. U.S data is thin on the ground this evening, trade war developments the main event.
EUR
European data was non existent last night, U.S/China trade war developments shocked markets, the USD generally stronger across the board. Eurodollar initially punched higher at 1.1260, but fell to close the overnight session at 1.1230. AUD/EUR fell out of bed, opening 0.75% lower this morning at 0.6183. With two RBA rate cuts expected by the end of the year and heightened risk aversion, the AUD's likely direction is still lower. If Trump announces further tariffs on Chinese products the AUD will fall another leg lower. Can Trump and Xi rescue talks at next month's Japanese G20 Summit? Time will tell. For now the AUD remains on the back foot, Business Confidence figures released this morning will be important for home grown direction. EU March Industrial Production and German ZEW are released this evening.
GBP
AUD/GBP opens practically unchanged this morning. GBP/USD fell from 1.30 as the USD was bid across the board. March U.K Unemployment & Average Earnings Data are released this evening, the AUD's cross currencies are all at the mercy of developments in the U.S/China trade war saga. Further punitive measures by either side will keep the AUD under firm pressure, if local data disappoints then AUD could well test 0.53 support, which has held for months now.
NZD
NZD/USD opens at 0.6566 this morning, kissing the technical lows of the last few weeks. The U.S/China trade deal is keeping risk assets under wraps and commodity currencies pressured. It's a quiet week for Kiwi data, the Kiwi is struggling for value at present, AUD/NZD fell overnight however, down at 1.0568 this morning.
Today’s data
AUD:
April Business Confidence
EUR:
March IP, German ZEW Survey
GBP:
March Unemployment