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Dollar slumps on heightened political uncertainty

By MATT RICHARDSON

The Australian dollar advanced higher from its open last week of 0.7395 after broad US weakness and a drop in Australia’s unemployment rate to 5.7% in April. A combination of a rebound in commodity prices and rising geopolitical risk after further turmoil by the Trump administration saw the Australian Dollar rally to a monthly high of 0.7470 on Friday evening. RBA policy minutes on Tuesday saw no real changes from April, with a neutral bias expected on rates for the remainder of 2017 and into 2018. We expect a quiet day on the markets with no domestic macroeconomic data released till tomorrow. The Australian dollar opens at 0.7455.

The Great British Pound (after several attempts) late last week closed Friday’s session above the 1.30 handle and reached an eight-month high of 1.3039 against the U.S Dollar. The pair edged higher assisted by UK CBI Industrial Order Expectations which asked UK manufactures to rate the relative level of order volumes expected for the next three months. The survey showed an improvement on April and output growth accelerated in the three months to May. Expectations were to hold at 4 however, orders surged to 9 this month, their highest in two years buoyed by stronger than expected domestic demand combined with rising demand from overseas.  The GBP/USD pair is currently trading at 1.3020. On the technical side, we now expect immediate support at 1.2970 followed by 1.2900 with the pair seeing strong static resistance around 1.3060. Looking ahead, sees the release of UK’s Rightmove House Price Index (HPI), it is viewed as a leading indicator of the housing industry’s health. 

After a quiet week on the domestic data front the New Zealand dollar opens this morning little changed when valued against its US Counterpart. The NZD/USD pair is currently trading at 0.6932. We now expect support to hold on moves approaching 0.6818 while any upward push will likely meet resistance around 0.6969. Looking at the week ahead there are no scheduled data releases for today and tomorrow with all attentions turning to Wednesdays Trade Balance and Thursday’s Annual Budget Release. The Kiwi was also little changed against the Aussie Dollar at 93.01 (1.0751) and the Pound Sterling at 53.15 (1.8814).

The U.S Dollar’s downward spiral continued throughout trade on Friday as the world’s base currency extended losses, marking its worst weekly performance in 13 months. Nervousness surrounding heightened political risks plagued the dollar for much of last week as markets develop concerns the Presidents meddling in FBI probes may be grounds for impeachment. The Dollar index fell some two percent touching lows not seen since Trumps election victory on November 9. The Dollar tumbled against safe haven assets, marking sharp declines against the JPY and CHF while commodity linked currencies found support in robust oil prices and the Euro resurgence continued. The 19 nation single unit currencies advance continued through last week as investors pare USD losses and shift support behind expectations the ECB will soon begin tempering its accommodative monetary policy platform amid improved macroeconomic indicators. The Euro jumped some 2.5% through trade last week and comfortably cruised through the psychological 1.10 opening this morning at 1.1205. Attention this week turn to FOMC meeting minutes, ECB President Mario Draghi and U.S GDP numbers while U.S political machinations continue to manage direction.