Currency Update - Monday 9th September 2019
AUD
Renewed risk appetite and a weaker USD set the scene for a more popular AUD which ended the week strongly against most majors. China reported weaker than expected trade figures over the weekend, however the PBOC moved to loosen lending requirements in response to the trade-war-affected data, announcing a 50bp RRR cut effective from September 16 with an additional 100bp allowed for some banks. Further adding to the improvement in risk sentiment, White House Economic Adviser Kudlow said that resuming trade talks with China was a positive development and said that everything will be on the table in the talks, noting the US would like to see results in the near-term. A quieter week of local data ahead, markets to be influenced by the ECB Press Conference on Thursday and US data on Thursday/Friday evenings.
USD
AUD opens a few spreads higher this morning at 0.6848, levels not seen in over a month. A mixed US employment report on Friday showing moderate strength in the labour force but still providing enough room to justify the current rate cuts priced in, while US Fed Chairman Jerome Powell also spoke ahead of the weekend but failed to provide any new information while appearing comfortable with current market expectations. Shortly before the payrolls data, Trump’s daily Fed-bash over monetary policy settings concluded “Where did I find this guy Jerome? Oh well, you can’t win them all!” Markets still expecting a 25 basis point cut from the Fed as early as next week’s meeting. US data highlights for the week ahead are the CPI figures on Thursday evening and then the Retail Sales figures on Friday.
EUR
AUD has regained the 0.62 handle, opening at 6-week highs against EUR at 0.6210. This week’s focus is firmly on Thursday evening’s ECB monetary policy statement and press conference. Expectations going in to the meeting for stimulatory action are high, we could potentially seem some form of QE re-introduced. The ECB has consistently stated its intention to do whatever it takes to support growth and with Germany staring down a technical recession, stimulatory action would seem appropriate sooner rather than later
GBP
Benefitting from improved risk sentiment, AUD finished last week strongly, opening this morning at 0.5573 against GBP. In Brexit news, opposition parties confirmed that they would oppose calls for an election and would not call a confidence vote on Monday. Is this perhaps a double bluff or are they actually open to the possibility of a Johnson-led no-deal Brexit? Meanwhile Johnson maintains that he is confident he can get a deal at the EU summit in October. Tonight’s UK GDP and Manufacturing Production figures provide the UK-based data highlights for the week.
NZD
The last month’s steady AUD gains against NZD came to an end on Friday, peaking just shy of the 1.07 handle and opening slightly lower this morning at 1.0656. Perhaps the effects of the RBNZ’s shock 50 basis point cut are finally priced in. The data calendar is quiet from across the ditch this week, with Thursday’s Business NZ Manufacturing Index likely to attract the most interest.