AUD - Australian Dollar
The Australian Dollar remains relatively unchanged from yesterdays open, holding just below 0.7 at 0.6991 to start Wednesday. The Aussie did manage to break through 0.7 briefly overnight on the back of continued US Dollar weakness although it could not hold the gains for long and ultimately retreated to current levels.
It was an eventful day for the Australian economy, although not so exciting for the Aussie as the RBA decided to cut rates to 1.25% from 1.5%. The first cash rate change in over three years however had little sustained market reaction and was well priced in prior to the announcement. Governor Lowe’s subsequent speech also held few gremlins but did note that “the board has not yet made a decision, but it is not unreasonable to expect a lower cash rate”, strengthening the outlook that there may be another rate cut before August. Adding to the mix of the domestic releases was also a disappointing retail sales report which outlined a fall in retail sales over April. Retail sales experienced a small contraction of 0.1%, another poor result for the sluggish Australian economy. The Aussie Dollar however, mostly shrugged off the dismal result.
Moving into Wednesday, the Aussie now turns to an important GDP release at 11:30 AEST. While a lagging indicator it does have implications for future decisions and will be closely monitored.
The United States Dollar continued to trade under pressure despite positive bounce backs in the equity and rates markets. The relief came from a number of fronts with the Federal Reserve conference and improvements in the Mexico situation. Fed Chair Powell kicked the good vibes off with some soothing words for the market. Powell outlined the Fed’s willingness to cut rates if needed over trade tensions saying “we are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labour market and inflation near our symmetric 2% objective”.
On the trade war front there are reports that US lawmakers were looking for ways to block Trump’s planned tariffs on Mexico. Meanwhile, Mexican President Obrador expressed optimism on negotiations with the US and said there’s an 80% chance that Mexico will avoid tariffs. On the China front however, news was less rosy with China issuing a travel alert for citizens intending to travel to the US. There are also reports that American luxury brands are already feeling the pinch with Tiffany and Co reporting that sales to Chinese tourists has fallen 25%.
With the mixed results for different parts of the economy the Greenback hasn’t reversed course and remains under pressure despite some important developments.
0.9312 - 0.9402 ▼AUD/EUR:
0.6182 - 0.6224 ▼AUD/GBP:
0.5435 - 0.5503 ▲AUD/NZD:
1.0528 - 1.0618 ▲AUD/USD:
0.6953 - 0.7031 ▼