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Aussie tumbles as Oil prices plunge

By MATT RICHARDSON

The Australian dollar neared three week highs in domestic trading yesterday. Reaching a top of 0.7515 and testing the 200-Day moving average, the Aussie failed to advance in Euro markets as West Texas Crude dropped 5% overnight. Subsequently we saw the AUD/USD one of the worst performers overnight, falling 0.8% to 0.7455. With a lack of local macroeconomic data, the Australian dollar continues to move off commodity prices and offshore developments as G7 meeting takes focus. The Australian dollar opens this morning at 0.7450.

The Great British Pound seesawed through Thursday against the U.S Dollar between levels of 1.2931 and 1.3013. UK’s Second Estimate of first quarter GDP was revised down to 0.2% vs an expectation of 0.3%, this marks the slowest growth since the beginning of 2016. The slowdown in the economy was driven partly by rising inflation,  feeling the pinch are consumer-faced industries such as retail and accommodation. The GBP/USD having spiked above 1.3000 before the data edged lower following the release and is currently buying 1.2940 at the time of writing.  Also weighing on the Pound were softer oil prices as OPEC and other major exporters extend their current deal to limit oil production for nine months. On the technical side, we now expect immediate support at 1.2915 followed by 1.2800 with the pair seeing strong resistance around 1.3000.

Whilst showing that New Zealand’s pace of economic growth is forecast to peak at 3.9 percent in 2019, overall yesterday’s budget had a limited impact on the Kiwi. Matching the highs witnessed only 24 hours prior, topside targets of 0.7054 failed to be breached as the world’s reserve currency held its ground. Dragging the entire commodity-backed spectrum lower yesterday was an announcement from OPEC signalling that they had agreed to extend production curbs. Opening this morning 20 basis points lower versus the Greenback at a rate of 0.7018, preliminary GDP from the United States this evening will be the key driving force.

Investors pared losses through trade on Thursday as the US Dollar steadied in what has been one of its worst weekly performances in over 12 months. The dollar found support in falling oil prices and a correction in commodity linked currencies. Oil plunged more than 4% through trade on Thursday after OPEC failed to deliver wide reaching cuts to production driving the Canadian, Australian and New Zealand dollars lower and adding further clout to a short term dollar bounce. The Greenback edged marginally higher against the Yen pushing back toward 112 while the Euro rally ran out of puff and the 19 nation combined moved marginally lower into the end of the day. Attentions now turn to key U.S macroeconomic data sets in what will otherwise be a relatively quiet final session. Preliminary quarterly GDP data and Core Durable Goods numbers will drive direction into the close and provide an important catalyst and driver of market expectations for future interest rate hikes.