AUD - Australian Dollar
Despite a sustained improvement in the demand for risk the Australian dollar failed to maintain upward momentum drifting off intraday highs at 0.6765 and closing lower on Thursday. Softer than anticipated domestic retails sales data and a surprise trade balance contraction dampened demand for the AUD while strength across US labour market indicators helped bolster demand for the world’s base currency. Retail sales data showed consumer spending fell further than anticipated in December a typically strong month for retailers and shoppers spend in the lead up to Christmas. Contracting 0.5% the print suggest a correction following Novembers surprise uptick and marks the 5th monthly decline through the last 6 months, a sign consumer confidence continues to falter. Moving back through 0.6750 the AUD touched intraday lows at 0.6727 as attentions turn to todays RBA monetary policy statement.
Having offered little outside the status quo message after Tuesdays rate announcement today’s quarterly monetary policy review offers a deeper insight into RBA policy thinking. While the labour market continues to underpin the broader economy, other key economic indicators persistently falter amplifying calls for further monetary policy action. Any hint the RBA is leaning towards another rate cut in the first half of 2020 could force the AUD back below 0.67 and test support at 0.6680.
The Great British Pound extended losses through trade on Thursday falling below 1.2950 as uncertainty surrounding trade talks and Britain’s future relationship with the EU weighed on investors. Having enjoyed a period of relative optimism and an expectation that both the UK and EU had at last found some common ground the stalemate and standoff resurfaced. Trade talks have soured already, while comments from French Finance Minister, Bruno Le Maire, suggesting British financial services firms will not have access to EU markets unless they agree to EU rules amplified the divide between British and European expectations. Having fallen 2% this week Sterling touched intraday and year to date lows at 1.2922 and we expect only shallow and short run rally’s through the coming weeks and months with the overwhelming bias still skewed to the downside, that is until a trade agreement and true exit strategy is reached.
Safe haven assets fell for a fourth consecutive day, with both the Yen and Swiss Franc losing ground against the USD as investors appetite for risk continued to improve. Measures taken by Chinese health and economic officials have encouraged markets, fostering increased optimism that the spread of the virus will be contained while the economic fallout will be muted by stimulus measures. The PBoC has pumped billions of dollars into the economy and financial system this week in a bid to get in front of any slowdown that might arise as a result of the virus while officials report “positive” results in preventing further widespread contamination.
The Euro touched two-month lows against the Greenback following weaker than anticipated industrial manufacturing orders in December. Data showed new orders for German made goods fell over 2% in the lead up to X=Christmas, the largest monthly depreciations in 10 months and well off the forecast .6% upturn. Falling below 1.10 the Euro opens this morning at 1.0978.
0.6680 - 0.6770 ▼AUD/EUR:
0.6080 - 06150 ▼GBP/AUD:
1.8970 - 1.9330 ▼AUD/NZD:
1.0350 - 1.0480 ▲AUD/CAD:
0.8890 - 0.8990 ▼