Currency Update - Wednesday 7th August 2019
AUD
After the RBA kept rates on hold the AUD appeared to clawing back some of the recent losses and probing above 0.68. However, this rally was short lived with the AUD still firmly at the mercy of offshore events as it quickly came under selling pressure and we open today slightly ahead of yesterday’s lows. All eyes are on China to be the savior or sinker of the AUD with China’s July data dump coming out over the next few days.
USD
As the trade war continues unabated White House Economic Advisor Kudlow has come out and announced that China is getting the worse of things and that the door is still open for Trump and Xi to come to a deal. The White House hinted that a deal could also include some easing of US tariffs that potentially could be an important bargaining chip in the ongoing negotiations. Noted Fed dove Bullard has left the door open on further US Fed policy adjustments. This certainly comes as good news for the White House with trade advisor Navarro calling on the Fed to take off another 75 basis points in the next decision.
EUR
The sharp depreciation of CNY yesterday has provided some interesting support for the EUR against the greenback, providing it with the largest one day gain since the 25th of January (0.86%). Market conditions still appear fairly weak for the beleaguered Euro lost most of these gains overnight despite strong German factory data. The data did little to alleviate concerns of the EU heading to recession with Macroeconomics economist Sebastien Dullien commenting “the German economy is currently hanging on by at thread”.
GBP
As we inch closer to the Brexit deadline we still have no further indication of what manner the UK will leave the EU. The new Boris Johnson government, as expected, has taken a more confrontational tone with Brexit minister Gove commenting that he is “deeply saddened that the EU now seems to be refusing to negotiate with the UK”. He continued to add that the UK is leaving deal or no deal on October 31st. In the middle of this Brexit drama the Pound has bounced between yesterday’s two year low, gained 0.6% in an impressive recovery and then promptly much of the gains to return the Pound to the doldrums.
NZD
All eyes are on the RBNZ today who are set to meet with the expectation being that the Kiwi will be cut 25 basis points in what is becoming an all too familiar headline in global economics. Governor Orr is also expected to reinforce market pricing for a high chance of another rate cut by November. This does open the door for the NZD to stage a comeback if a less dovish tone is taken however this remains an outside chance. If anything, the inflamed trade war between US and China has acted as further pressure on Orr to take a more bearish stance.
Today’s data
AUD:
No data
USD:
FOMC Member Evans Speaks
EUR:
No data
GBP:
No data
NZD:
12.00pm RBNZ Official Cash Rate and Monetary Policy Statement
1.00pm RBNZ Press Conference
CNY:
No data