Home Daily Commentaries Month-end is finally here

Month-end is finally here

Daily Currency Update

As we had feared, Monday was indeed a very quiet session for the Australian Dollar in both local and offshore markets. Weekly data from the CFTC (Commodities and Futures Trading Commission) in the US shows that net speculative long positions in the AUD had risen from near-zero in early June to a peak on September 29th of around +77,200 lots. Over the last four weeks, some of these long positions have been gradually liquidated and the net balance stands now at just +57,300. This so-called Commitment of Traders report, released each Friday at 3.30pm ET is still a decent – though far from perfect – guide to investor positioning more broadly. Monday’s price action where the AUD was unable to capitalise on general US Dollar weakness was entirely consistent with further long liquidation and we note that both the 100 and 200 day moving averages (AUD/USD0.7662 and 0.7693 respectively) are still falling. It should be noted, too, that the AUD/NZD cross rate has now fallen below all four of its main averages (20, 50, 100 and 200 day) which may at the margin also begin to weigh down on the AUD. The local economic data vacuum will only be very partially filled by the weekly consumer confidence index, new home sales and private sector credit numbers this morning and there are far more important numbers on retail sales and international trade to wait for later in the week.

Key Movers

A recently rare thing happened on Monday: the New Zealand Dollar didn’t make a fresh low against the USD and didn’t close lower on the day. It is probably premature to hang out the bunting and hold street parties in celebration and we should bear in mind that it’s barely half a cent off the 5 ½ month low of 0.6828 reached at the end of last week. Indeed, the main reason for the modest improvement was all-round weakness in the USD; the NZD still fell against GBP and EUR and only just held its ground against the CAD and AUD. Economic data this morning on building permits, business confidence and household credit are rarely big market movers for FX and in any case, most of the numbers to be released over the next few weeks will be viewed through the prism of uncertainty around the September 23rd election. Arguably the most important local data this week will be the Q3 labour market report on Wednesday but this is a quarterly picture and won’t capture any month-to-month swings in the way that the US non-farm payrolls does. All told, so low are expectations for the NZD currently that another day without a fresh low printed would be considered something of a success.


The GBP enjoyed a very good start to the trading week and ended Monday way out in front on the FX leaderboard. GBP/USD briefly touched 1.32 whilst there were 100+ pip gains for GBP/AUD, GBP/NZD and GBP/CAD. Two well-respected surveys of confidence and activity will be reported under embargo at midnight local time in the UK and could well set the tone for trading until London dealers arrive to a chilly start around 7am. GfK’s consumer confidence survey is expected at -10 in October after -9 in September and the main interest here will be to see if yet another month of falling real wages and the prospect of an imminent BoE rate hike have dented confidence further. At the same time, the Lloyds Bank business barometer will be released. This measure has fallen steadily throughout 2017 and from a recent high of +47 in April, was down at +17 in August before a very modest rally to +23 in September. No consensus forecasts are available for either of these indicators so their impact on the market for GBP should be a straightforward up/down depending on whether they are better or worse than the prior month’s readings. Last Thursday’s highs of GBP/USD1.3274 and GBP/AUD1.7226 will provide some technical resistance but it is the latter of these which looks most vulnerable should liquidation of stale long AUD positions again be the feature of the day.


Traders and analysts spent much of Monday trying to decide whether the latest twist in the Trump-Russia story was something to get excited about or not. It is a fiendishly difficult narrative to follow but by the end of a session in which equities and the US Dollar both ended lower, it was tempting nonetheless to link the two. Lower stocks, lower bond yields and a somewhat weaker USD index (-0.3%) might not endure until the end of a week which sees major economic data releases and a new FOMC statement but as Halloween approaches, they were enough to spook investors yesterday. For Tuesday, the chief focus will likely be on US consumer confidence numbers where the recent string of all-time highs for the stock market is expected to push the index to a fresh cycle peak. It is a moot point whether this alone will be enough to support the USD today as the main feature of trading in the New York session will be the month-end ‘fixing’ of foreign exchange rates and the potential for the re-balancing of portfolio hedges by global institutional fund managers. These flows can be a lottery to predict in advance, but be aware of the potential for plenty of volatility during the Antipodean night.


The euro gained some support Monday from a very strong report on business, consumer and economic confidence which showed all the indicators at or close to 16-year highs. Also helping improve investor sentiment was a 2.5% daily increase in Spain’s stock market which was taken as an indication that the constitutional crisis in Catalonia might not be taking an immediate turn for the worse. As with the political shenanigans in the United States, it is not intuitively obvious to an outsider what are the implications of each twist and turn in the Spanish plot but the stock market and bond markets are seen as useful barometers of investor sentiment. Madrid’s IBEX index surged almost 250 points yesterday whilst Spanish 10 year bond yields fell 9bp to just 1.48%. If this is indeed a crisis, it’s not having much of a negative impact on local financial markets. Having fallen to a low of USD115.80 on Friday, the euro spend the whole of yesterday on a 1.16 handle and we could be on the cusp of a modestly bullish technical formation in which the 20 day moving average crosses up through its 50 day measure. EUR/AUD, meantime, has consolidated on a 1.51 big figure and it, too, should be able to eke out modest further near-term gains.


Canadian consumer confidence numbers released yesterday were pretty much in line with consensus expectations, but nonetheless showed a very modest second consecutive decline. The headline index fell from 58.3 in September to 57.6 in October but the sub-index tied to perceptions about the economy and housing had the lowest month-end reading since January. On a generally poor day for the US Dollar, USD/CAD was thus able to eke out some very modest gains; reaching a session high in New York of 1.2850 having begun the week in Sydney yesterday around 1.2825. Canada is one of the very few countries to release GDP figures on a monthly basis (Australia and New Zealand can’t even calculate CPI monthly!) and though it’s expected that the latest figures will show only a slight moderation in the annual rate of growth to 3.6% from 3.8%, much of this growth came earlier in the period before the BoC moved to twice hike interest rates. Monthly GDP in July was unchanged and the August numbers out tomorrow are expected to be up just 0.1% m/m. Who says monetary policy doesn’t work quickly?

Expected Ranges

  • AUD/NZD: 1.1150 - 1.1220 ▼
  • GBP/AUD: 1.7100 - 1.7225 ▲
  • AUD/USD: 0.7660 - 0.7715 ▲
  • AUD/EUR: 0.6560 - 0.6620 ▼
  • AUD/CAD: 0.9820 - 0.9470 ▼