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Australian Dollar breaches 78 U.S. cents

By JOEL HOLMES

The Australian dollar moved lower through trade on Thursday, forced below 0.78 U.S cents following softer than anticipated retail sales growth. Consumers tightened their purse strings through August marking a second consecutive monthly depreciation in consumer led spending. The soft read dampens hawkish investors calls for the RBA to increase interest rates and supports the Central Bank’s decision Tuesday to maintain a neutral policy stance throughout the remainder of 2017. Having touched intraday highs at 0.7866 the AUD fell sharply as markets looked to compare the paths of monetary policy. With the U.S Federal Reserve expected to raise rates in December the USD has begun to claw back some of July’s losses, limiting AUD upside in the short term and opening the door for further downside with support forming at 0.7730. Attentions now turn to key wage growth and non-farm payroll prints this evening as the primary drivers into the weekly close.  

The New Zealand Dollar hit a four-month low during the American trading session as the greenback strengthened, opening this morning at 0.7117. With a quiet day on the domestic front the Kiwi drew momentum from its counterpart which saw a reduction in unemployment claims. The Greenback was further buoyed by the Federal Reserves’ Williams and Harker’s broad optimism, both supporting an US interest rate hike sooner rather than later. Closer to home, the New Zealand Dollar also felt the ripples coming from across the Tasman as Australia’s retail sales data disappointed the market, further undermining any RBA talk of a tightening policy stance. Despite the move lower in the Aussie, the Kiwi remains virtually static against the AUD, opening this morning at 0.9128. To close out the week, the Kiwi now turns back to the USA for unemployment figures.

The Great British Pound is weaker today when valued against its US counterpart falling overnight to 1.3107,  its lowest in nearly a month, on the back of on continued concerns over Theresa May's future as Prime Minister. Her position as Prime Minister is at risk a luckless conference speech with a number of Conservative MPs reportedly seeking to replace her as soon as possible. The UK macroeconomic calendar has little to offer again today with no scheduled data releases. The GBP/USD pair is currently trading at 1.3119. We now expect support to hold on moves approaching 1.3070 while any upward push will likely meet resistance around 1.3190.

It was a day for the US Dollar, regaining momentum after unemployment claims beat expectations for the month of September. With the continuation of upbeat data, the dollar continues to be driven by the likelihood of a December interest rate rise by the Federal Reserve, with markets currently pricing an 87% chance of a 25bps hike. The U.S. Dollar Index (DXY) saw gains of 0.5% with major equities gaining between 0.5-0.7% and hitting new highs. EUR/USD declined from intraday highs of 1.1770 to test the handle at 1.17 as continued political tensions in the Catalan region of Spain continue to put pressure on the common currency. The release of ECB minutes showed the central bank remained positive on the possibility of tapering QE next year but are only in preliminary discussions with rates to remain at record lows. Investors look to Fridays release of Non-Farm Payrolls and Unemployment rate this evening.