Aussie extends its gains amid positive trade war news
Friday 14 December, 2018
Daily Currency UpdateThe Australian Dollar pair edged marginally higher for a fourth consecutive day, extending its gains to as high as 0.7246 before trimming the positive momentum at the close. Opening this morning at 0.7222, the Aussie has been the beneficiary of a general risk-on tone throughout the week as the news from the US-China trade war improves. Overnight, the WSJ reported that China was drafting a replacement for the Made in China 2025 policy and are planning on further opening their borders to foreign companies. The move has been touted as a significant olive branch to the US as the contentious policy has led to alleged intellectual property theft and forced technology transfers. Adding to the positive news from the trade war was President Trumps commitment to not raising tariffs until he finds out whether the two sides could reach a deal. He also mentioned that he’s happy to meet President XI again. Lastly, the Huawei CFO was granted bail in Canada and Trump has confirmed he would intervene if it would help achieve a trade deal with China. Moving into Friday, there is little on the domestic calendar to excite markets. China is set to release its retail sales, industrial production and fixed asset investment for November however that should pique the interest of investors.
Key MoversThe NZD held steady during yesterday’s trading session with no developments on the US-China trade relations and no major macroeconomic data released. This morning, Business NZ released their manufacturing index data which resulted in the same figure as last month at 53.5. ANZ will release their business confidence data next week Tuesday morning which is expected to have a major impact on the Kiwi. This data is a leading indicator of economic health that measures how quickly businesses react to market conditions. Last month’s figure sits at -37.1, and a release above 0.0 indicates optimism for the NZD. The NZD opened at 0.68630 against the USD this morning.
The Great British Pound is stronger this morning when valued against the Greenback after UK Prime Minister Theresa May survived a no confidence vote from her party but investors said the currency’s gains could quickly evaporate if Britain’s parliament remains deadlocked over Brexit. On the release front, just like Thursday, there are no scheduled releases today. We expect the Pound Sterling will remain under pressure as the market continues to adjust expectations amid political instability and an ever-evolving Brexit platform. From a technical perspective, the GBP/USD pair is currently trading at 1.2653. We continue to expect support to hold on moves approaching 1.2590 while now any upward push will likely meet resistance around 1.2665.
All attentions last night turned to UK Prime Minister Theresa May after she survived a no confidence vote from her party. The Pound Sterling rallied against the Greenback to a daily high of 1.2686, moving away from a 20 month low, before settling around 1.2650. Looking ahead today on the release front the US will release Retail Sales figures for the month of November, seen up 0.4% MoM, along with Industrial Production for November, and Purchasing Managers' Index (PMI) which should see a modest uptick in the manufacturing sector. From a technical perspective, for a fourth consecutive day the Greenback is slightly weaker this morning with valued against the Aussie dollar which is currently trading at 0.7222. The Greenback has opened flat against the Kiwi dollar with the NZD/USD pair currently trading at 0.6853.
The Euro fell modestly overnight as the European Central Bank failed to surprise markets with their monetary policy settings however president Draghi’s comments that downside risks were mounting forced the Euro marginally lower. In the leadup to the announcement the Euro was testing key resistance at 1.1400 but ultimately failed to break higher. The EUR/USD fell from 1.1390 to 1.330 after the dovish comments from Draghi before rebounding to levels closer to 1.1365 as the greenback posted mixed results on the day. Friday’s session see’s Eurozone PMI’s released for the month of December as well as the Q3 labour cost read. The Economic and Financial Affairs council are also set to meet however it is not expected to have an impact on markets. The key release for the EUR/USD pair is US retail sales figures for November due out of the world’s largest economy. On the technical front, we see downside supports at 1.1330 before the key psychological level of 1.1300 whilst on the upside we still see resistance at the 1.1400 handle with any moves through this level expected to meet further resistance on moves approaching 1.1425.
The Canadian Dollar moved within a 40 pip range on Thursday between a low of 1.3338 and a high of 1.3383. In the absence of any top tier local data markets didn’t have much to react to and looked towards the States at their inflation numbers where import prices dropped last month being the biggest decline since August 2015. Local data released by Statistics Canada saw new housing prices unchanged on a national basis for a third month in a row. However, looking individually at cities house prices fell in eight of the 11 cities surveyed in the index. The only two cities that saw increases where Windsor and Ottawa. The local calendar is light on the last day of the week, markets will turn their attention to the anticipated US Retail Sales.
- AUD/NZD: 1.0460 - 1.0600 ▲
- GBP/AUD: 1.7300 - 1.7660 ▲
- AUD/USD: 0.7170 - 0.7300 ▼
- AUD/EUR: 0.6290 - 0.6390 ▼
- AUD/CAD: 0.9570 - 0.9670 ▼