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AUD holds steady under 69c against the US Dollar

AUD - Australian Dollar

The Australian Dollar moved within a tight 25-pip range vs the Greenback on Wednesday, moving between a high of 0.6871 and a low of 0.6896, low tier macroeconomic data released had little impact on pair. The Westpac-MI Leading Index, which is an indicator that uses a variety of local and international economic indicators to predict Australian economic growth looking three to nine months into the future dropped to -0.47% in April, down from -0.13% in March. The Index growth rate has been consistently negative over the last five months, a clear signal that economic growth through the three quarters of 2019 is likely to be below trend.

Meanwhile, the Construction Work Done data for Quarter 1 also missed estimates, which is a key metric that flows directly into the GDP. Construction work unexpectedly contracted 1.9% in the first three months of 2019. This data will likely provide further support to the Reserve Bank for a June rate cut.

Looking ahead, locally we see the release of Flash Manufacturing PMI and Flash Services PMI data. From a technical perspective, the AUD/USD pair is currently trading at 0.6880. We continue to expect support to hold on moves approaching 0.6860 while now any upward push will likely meet resistance around 0.6900 and 0.6930 levels.

Key Movers

The EUR came under renewed downward pressure last week as an escalation in US-China trade tensions reminded markets that the euro area finds itself in a particularly vulnerable position should US-China trade talks collapse. Adding to US-China related uncertainty, the European elections might ignite Euro weakness. The European parliament election over 23-26 May (result will be out Sunday evening) looks likely to be a market-relevant event this time. The election result could have an effect, especially on Italian politics, triggering government changes or further confrontation between EU and Italy, posing a weakening pressure on EUR in the medium term. The pair is current changing hands at 1.1155 against the Greenback.

Over in the UK, the GBP/USD touched a 4-month low of 1.2624 on reports suggesting the UK Prime Minister was going to be resigning by the end of the business day 22nd May after Andrea Leadsom, Leader of the House of Commons resigned over the PM’s Brexit plan and says she no longer believes in the governments approach. It’s fair to say there is chaos within the UK government over Brexit which will keep the Pound under selling pressure.

The latest FOMC minutes have indicated a patient approach in setting interest rates in the near-term and the markets view is that US rates will remain where they are for now.

Expected Ranges

AUD/USD: 0.6810 - 0.6930 ▼

AUD/EUR: 0.6110 - 0.6210 ▼

GBP/AUD: 1.8300 - 1.8650 ▼

AUD/NZD: 1.0540 - 1.0640 ▲

AUD/CAD: 0.9200 - 0.9290 ▲