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Australian Dollar hanging on to 78c


The Australian dollar edged marginally lower through trade on Monday forced downward by an increasing appetite for the worlds base currency. Having found support last week, the AUD tested 0.79 however a series of lower lows and lower highs since suggests another foray below 0.78 U.S. cents is on the table. Interest rate expectations are driving direction and with the Australian dollars yield advantage expected to disappear before the year is out we could see the currency succumb to further USD strength. With firm support at 0.7730 still in play a soft CPI print Wednesday and an upbeat US GDP read will only highlight the diverging monetary policy expectations and potentially see the Aussie test new lows. Attentions now turn to the race for the Federal Reserve Presidency. Should John Taylor win the appointment later this week the known hawk will likely engender further USD support and heap more bearish pressure on the AUD. 

The New Zealand Dollar sell-off looks to have abated following the news of the formation of a coalition government over the weekend. Markets will keep a keen watch on any policy changes and reforms under new Prime Minister Jacinda Ardern, who becomes the youngest ever female to serve the country. Despite a local bank holiday, there was decent intraday movement to start the week, with support seen at 0.6930 in yesterday’s domestic session and a five-month low versus the US Dollar. Seeing a small revival overnight, the Kiwi opens this morning at 0.6965.

The Great British Pound maintained a relatively tight trading band throughout Monday holding onto gains made at 1.32. With little macroeconomic data on hand to drive direction the Pound found support on the back of Brexit negotiations, negotiations that seem to be progressing with a renewed optimism. The upbeat attitude to Brexit talks allowed Sterling to stave off broader USD gains as investors back the posting of hawk John Taylor to the head of the Federal Reserve. Attentions now turn to Wednesday’s GDP print for direction through the latter half of the week and will act as a key marker ahead of an anticipated November rate hike. Watch resistance on moves approaching 1.33.

Unable to keep up the pace with a stronger Greenback, the Euro dollar has fallen for a third day when valued against the worlds reserve currency. The EUR/USD touched a low of 1.1725 and closed the New York session at 1.1748. The recent downside comes from a few factors, tensions in Catalonia have been heavy on the EUR, President Trump due to make a decision on the next Fed chair and the ECB meeting later in the week. On the data front, we saw low tier data with the release of Eurozone Consumer Confidence, the index rose to -1 in October 2017 from -1.2 in September, this was the highest level in sixteen years and shows optimism is improving within households in Europe. In other news, USD/JPY has hit a three-month high following on from Shinzo Abe’s snap election victory over the weekend, the pair touched 114.10 before easing back at 113.40. Looking ahead, markets are relatively quiet on the data front, we see the release of PMI out of Japan, Europe and the USA.