Daily Currency Update

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Australian Dollar rises as risk appetite returns


The Australian dollar is slightly stronger this morning when valued against the Greenback on the back of risk appetite as optimism towards a potential trade deal between the US and China. On the release front yesterday we saw worse-than-expected Australian housing data released as Home Loans plummeted 6.1% in December and Investment Lending for Homes declined by 4.4% in the same month.

Looking ahead today and we will see the release of the Westpac Consumer Confidence Index for February, previously at -4.7%.

From a technical perspective, the AUD/USD pair is currently trading at 0.7094. We continue to expect support to hold on moves approaching 0.7070 while now any upward push will likely meet resistance around 0.7145.

The New Zealand Dollar was little moved on Tuesday as investors looked to stay on the sidelines in preparation for todays RBNZ Rate Statement release due this afternoon. Opening the morning at 0.6734 the Kiwi traded in a tight range hitting highs overnight of 0.6742 as risk appetite looks to have improved in the market.

We saw a 2% rise in inflation expectations in New Zealand, easing slightly from 2.03% for the previous quarter, in line with the expectations that there could be an increased chance of interest rate decline in 2019.

This afternoon sees the RBNZ release this year’s first interest rate decision where it is expected that rates will stay on hold at the benchmark rate of 1.75%. Investors will be keen to read the latest monetary policy statement as central banks around the world continue to downgrade their growth figures for 2019, citing economic slowdowns globally.

The New Zealand Dollar opens this morning at 0.6735.

The Great British Pound opened lower at 1.2860 yesterday morning following the weakest GDP reading in six years. Taking an upward direction overnight following positive comments from Theresa May in front of parliament, the Sterling hit overnight highs of 1.2910 after saying that she can reach a deal with fellow MP’s as February 27th is set as another deadline day.

May is open to talks still with Labour party Jeremy Corbyn as Brexit headlines will continue to dominate the headlines over the coming weeks. Rises for cable were also seen overnight as Bank of England Governor remained positive that a positive Brexit deal will see the economy grow more strongly by year end with a positive signal about trade in services.

CPI figures this evening in the UK look to be an important release as analysts predict a decline in inflation below 2% due to a new cap on energy prices. A decline in inflation figures is likely to follow disappointing manufacturing and GDP figures as weak numbers could possibly put a pause on interest rate hikes by the BOE.

The Great British Pound opens 0.3% higher this morning at 1.2895.

Recent US Dollar strength pulled back overnight following a two-week rally from 95.10 at the start of February to 97.20 overnight on the US Dollar Index (DXY). Movements in the safe-haven currency following global economic concerns look to have taken a pause as risk appetite returned into the market.

Positive talks between the United States and China look to have spurred demand back into riskier assets as the United States government has avoided a shutdown for the second time this year. Partial funding for President Donald Trumps controversial wall looks to be secured as the amount approved and agreement in place continues to displease President Trump.

Inflation figures are due for release this evening in the United States as there is the expectation that inflation will rise by a meagre 0.1% for the month of January with an annualised reading of 1.6%.

The Euro is stronger this morning when valued against the Greenback reaching an overnight high of 1.1339 as investors moved away from the Greenback and put money in riskier assets on rising hopes of a breakthrough in U.S-China trade talks.

Looking ahead today and the EU will release December Industrial Production while the US will present inflation updates for January. Final yearly inflation is foreseen at 1.5% while the core reading has been forecasted at 2.1%.

From a technical perspective, the EUR/USD pair is currently trading at 1.1327. We continue to expect support to hold on moves approaching 1.1260 while now any upward push will likely meet resistance around 1.1350.

Overnight we saw the Canadian dollar strengthen against the greenback on the back of gains in oil prices and as risk appetite was boosted by the potential de-escalation of the trade dispute between the United States and China. The Canadian dollar has advanced 3.1 per cent since the start of 2019, the best performance among G10 currencies.

On the data front there are no scheduled releases today.

From a technical perspective, the USD/CAD pair is currently trading at 1.3234. We continue to expect support to hold on moves approaching 1.3220 while now any upward push will likely meet resistance around 1.3320.