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Aussie edged lower in face of broader risk of mood.

By OFX

The Australian Dollar edged downward through trade on Friday moving toward intraday lows at 0.7230. US investors returning from Thanksgiving celebrations added to a broader risk off mood, sending equities and bond yields lower, while oil led a broader commodity decline that saw iron ore slip below $70 a tonne for the first time in 7 weeks.

Given to scope and scale of Fridays risk aversion the AUD held up reasonably well and appears to have settled within a new short-term range between 0.7150 and 0.7330. Investors appear confident the domestic economy is showing signs of improvement and the next move from the RBA will be up; while signs the Federal Reserve may moderate the pace of rate hikes as they approach neutral has helped the AUD bounce of recent lows and consolidate higher.

Trade remains the primary driver of the AUD through the short-term as US/China trade hostilities continue to weigh on the broader AUD value. With delegates set to met at this weeks G20 summit a temporary détente may help bolster short term demand for the AUD and drive an advance beyond resistance at 0.7330.

The New Zealand Dollar retreated to close out last week as a stronger Greenback again took the initiative. Opening this morning at 0.6787, the Kiwi fell 0.5% on Friday as risk assets again felt the brunt of a resurgent US Dollar.

The USD appreciated across the board last week as volumes remained thin and trading tight. There wasn’t too much data reports to digest but there was news that OPEC planned to cut production by around 1 million barrels. The announcement dragged down the energy sector and left the S&P down 0.7%. The ensuing declines reverberated out to other risk assets including the NZD. Adding to the shift away from riskier assets was the market positioning itself ahead of the all-important Trump-Xi meeting this week. While hopes of a reconciliation remain extremely unlikely, a ‘ceasefire’ may be on the table with Trump potentially refraining from increasing Tariffs on the 1st of January as planned.

Moving into the last week of November, the Kiwi has a bit more specific news to digest than usual. Q3 retails sales are due for release today and the RBNZ Financial Stability Report is on Wednesday. There is also an ANZ survey on Thursday and the Trump-Xi meeting next weekend.

The Great British Pound finished lower for the week following news over the weekend that EU leaders have approved an agreement in less than an hour for the withdrawal of the U.K after two years of negotiations. With the announcement fully priced in already after Sterling gains on Thursday, Cable was lackluster as it drifted 0.5% lower to close the week.

Opening the morning at 1.2880 on Friday, absent of any domestic data the GBP/USD pair moved steadily lower throughout the day to finish just above the 1.28 handle as markets digest the news and terms that the UK is scheduled to leave the EU on 29th March 2019.

Sterling has opened fairly flat despite Brexit agreements over the weekend as we look towards tomorrow mornings Bank of England Governor Mark Carney speech in London at a policy exchange event.

The Great British Pound opens this morning at 1.2808.

The US domestic docket offered little to excite investors on Friday and once markets re-opened after the Thanksgiving Holiday the US stock market and bond yields dropped on the back of risk aversion. However, the US Dollar index which measures the greenback’s strength against a basket of six major currencies, climbed to a one-week high of 96.98 in late North American trade as heightened risk aversion boosted demand for the currency.

The US stock market has certainly taken a beating down nearly 4 percent in just a few days, according to Bloomberg the S&P 500 posting the third-worst Thanksgiving week in 80 years. Meanwhile, oil prices were the main focus on Friday with West Texas falling almost 8% to a shade above $50 per barrel, this was the lowest since October 2017.

A quiet start to the week, Wednesday sees things kick-off with a couple of Fed members due to speak ahead of the main Fed chairman. Also investors will be focusing their attention to Friday’s meeting with Trump and the Chinese president at the G20 summit.

The Euro struggled on Friday, falling 0.5% against the greenback as Markit PMI’s suggested that economic growth was slowing in the Eurozone amidst concerns around both the Brexit situation as well as uncertainty surrounding the Italian budget negotiations. EUR/USD depreciated from 1.1420 to 1.1330 throughout the day as the EUR weakness also boosted the dollar across the board.

Today’s session will feature commentary from European Central Bank President Mario Draghi as he addresses the EU parliament’s economic committee on Monday. Following this we have November IFO business climate survey numbers due out of Germany; markets are expecting a slowdown in Europe’s largest economy. The key risk events for the week are delivered on Friday, through October core CPI and the October unemployment rate. Both reads are historically market movers, we expect any deviations from expectations to inject some volatility into the Euro.

Technical levels worth considering for the EUR/USD are 1.1438 on the upside whilst downside moves are expected to find bid support around the 1.1327 before the weekly low of 1.1216.

The Canadian Dollar maintained a largely tight range throughout trade on Friday, bouncing between 0.7540 and 0.7580. Despite another marked collapse in oil prices (West Texas down 8% while Brent Crude slipped 6%) the Canadian dollar withstood broader downside moves on news Alberta Province will enact measures to clear a backlog of crude oil and soften the blow of price discounts caused by pipeline congestion.

The Canadian dollar has suffered a sharp correction through the last 7 weeks, falling almost 2 cents in the wake of a broader oil price correction. While short term reprieves have halted the CAD decline the global glut of supply will likely ensure prices remain subdued through the medium to long term, weighing on the CAD moving into the next RBC policy announcement.

With little of note on the docket today, attentions remain with fluctuating oil prices while Friday’s GDP print remains the weeks big ticket macroeconomic item.