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Aussie recovery continues on sustained US political turmoil

By MATT RICHARDSON

The Australian dollar traded in a tight twenty-point range during the domestic session to start the week. Drifting initially on open to a low of 0.7435, we saw US dollar weakness overnight, benefiting the AUD/USD cross to an overnight high of 0.7490. A potential retest of critical resistance levels at 0.75 could occur should risk on sentiment remain in play. Domestically there is little news this week as we look to offshore developments with a keen eye on speeches from several FOMC members before the Fed Reserve meets again on June 15th. The Australian Dollar opening this morning at 0.7470.

The Great British Pound has lost ground against the Greenback as four separate polls conducted by firms for Sunday Papers have found that Labour is advancing at the expense of the Conservatives for the first time in the general election campaign. The GBP/USD also referred to as the ‘Cable’ pulled back under 1.3000 and is currently changing hands at 1.2997 at the time of writing. In a separate report  UK’s Rightmove House Price Index (HPI), was up for a fifth month in a row according to Rightmove. House prices climbed 1.2% month-on-month to a record GBP 317,281 in May with families with children under the age of eleven are twice likely to shift their houses, Rightmove said. On the technical side, we now expect immediate support at 1.2950 followed by 1.2900/10, approaches to 1.3000 may attract some short term selling.  

The New Zealand Dollar surged yesterday as political uncertainty in the US continues to weigh on the US Dollar coupled with a mixed tone of data releases last week. Markets have been watching events unfold surrounding Trump and whether he would be able to deliver on his pro-growth initiatives to help boost the economy. The kiwi moved from 0.6913 to 0.6996 over the course of Monday days of trade, a level not witnessed since ANZAC day. Investors look ahead to tomorrows NZ Trade Balance Report which is anticipated to show a narrowing surplus in April. 

The U.S Dollar suffered a further sell off through trade on Monday extending losses and deepening the recent downtrend that has engulfed the worlds base currency. The Dollar moved through 6 month lows when pared against a basket of major counterparts as investors continue to foster concerns surrounding the stability of President Trump’s Tenure. The pall that is Trump’s interference in FBI probes continues to weigh on the Dollar as market participants are forced to revaluate expectations and manage the likelihood of Trump delivering on pre-election promises. The Greenback moved through 111.50 against the Japanese Yen while the Euro’s appreciation continued through 1.1250. Touching intraday highs at 1.1263 the Euro made a new 6 month high, buoyed by comments from Angela Merkel and a suggestion the Euro’s weakness was behind Germany’s massive trade surplus. As attentions turn to a raft of service and manufacturing data across Europe and the US we expect political turmoil to drive direction through trade on Tuesday and in the lead up to Wednesday FOMC meeting minutes.