Daily Currency Update

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RBA keeps rates on hold

By BRETT OTTAWA

There has been an overall subdued reaction to The Reserve Bank of Australia’s decision to keep the cash rate at a record low of 1.5 percent for a 10 consecutive month. In an announcement unanimously predicted by economists, RBA Governor Philip Lowe in his statement highlighted that sluggish real wages growth was constraining household consumption. Whilst the performance of the Australian dollar over the past 24 hours has been robust, its main form of support has come off the back of a Greenback which has slumped to an 8-month low. Ahead of today’s important GDP print which is expected to reveal a mediocre growth trajectory of just 0.3 percent, the Australian dollar opens in a stronger position as it currently buys 75.08 US Cents. 

The Great British Pound was the exception in movements overnight against the US dollar as investors position themselves ahead of the UK election. While most currencies took advantage of a weaker US dollar, the Sterling moved lower from its intraday high of 1.2950 in choppy trade as opinion polls are released over the coming days. With little macroeconomic data to focus on the cable cross moved to an overnight low of 1.2875 as the YouGov poll currently show a tightening in the Conservative parties lead to 4 points ahead of Labour. GBP/USD paired losses in the North American session to test the 1.29 handle on open. The Sterling is also lower against the Australian dollar - 1.7175 and the New Zealand Dollar - 1.7950.

With Thursday bringing the UK Election, a potentially pivotal ECB meeting and former FBI Director Comey’s testimony, off-shore markets are keen to reduce their positions. Traders have worked the USD lower in an attempt to offload risk before these three key events leading to a softening USD. Domestically, the Kiwi continues a strong recovery. Driven by buoyant domestic data and US policy concerns, the NZD rose to 72.05 before settling at 0.7188 this morning. Direction now turns to Thursday’s three key events while keeping an eye across the Tasman for first quarter Gross Domestic Product.  

The U.S Dollar enjoyed mixed fortunes through trade on Tuesday advancing early before relinquishing gains into the daily close. The US Dollar is lower this morning after a rally in US Treasuries. On the US data front, overnight the US JOLTS Jobs opening were 6.04M against 5.79M previous. The EUR/USD pair traded within a tight 40 pips range yesterday reaching a session high of 1.1284. Eurozone Retail Sales figures for the month of April rose by 0.1% when compared to March, and by 2.5% when compared to a year earlier. Looking ahead today a pretty quiet session expected with the only scheduled release of German Factory Orders and Italian Retail Sales for the month of May. The JPY/USD pair is currency trading at 109.36 tumbling below 110. The greenback saw losses against all of the major currencies but USD/JPY took the brunt of the selling. We now expect support to hold on moves approaching 109.10 while any upward push will likely meet resistance around 109.80.