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Aussie buoyed as USD’s haven status wavers

AUD - Australian Dollar

The Australian dollar advanced through trade on Friday, buoyed by a broader USD correction to bounce off weekly lows and push back through 0.69 US cents. The AUD found support late Thursday after softer than anticipated US manufacturing data sparked concerns the US/China trade war is actively slowing growth prospects within the world’s largest economy. Reports showed manufacturing activity hit near decade lows in May, a read compounded by a slow down in orders for capital goods on Friday.

Trade tensions between the US and China remain frosty as China denounced comments from US secretary of State Mike Pompeo, confirming there is no connection between Huawei CEO and Beijing. While the escalating war on words was calmed by comments from President Trump late Friday that suggest Huawei could be included in a trade deal, the deterioration in trade relations throughout the last fortnight has hampered demand for the AUD. That said, we have seen a shift in haven demand for the USD through the last 48 hours. Market expectations the trade war would prove USD positive as a haven asset have wavered as analyst look to broader capex indicators and increased expectations for protectionism as markers for a Fed Rate Cut.

The Aussie opens the week buying 0.6930 as attentions remain squarely affixed to global trade expectations ahead of next weeks RBA interest rate decision. We expect support on moves approaching 0.6830 with upside momentum hampered by maintenance of the risk off environment.

Key Movers

The US Dollar moved lower against a basket of currencies on Friday as investors began to question its status as a safe haven asset amid escalating trade tensions. Softness across manufacturing data Thursday and Capital Goods Orders Friday suggests economic growth is faltering, and as protectionist talk intensifies markets expectations for a Fed Rate cut increase.

The Great British Pound advanced through trade on Friday driving higher against the USD and Euro after Prime Minister May set in place plans to step aside having failed to push through her European divorce deal. Sterling rose back through 1.27 to touch intraday highs at 1.2719. Attentions now turn to who will succeed May as leader. Fears a euro-sceptic will take her place weigh heavy on investors minds as the likely hood of a NO DEAL split increases.

Expected Ranges

AUD/USD: 0.6830 -0.6980 ▲

AUD/EUR: 0.6150 - 0.6250 ▲

GBP/AUD: 1.8280 - 1.8520 ▼

AUD/NZD: 1.0520 - 1.0620 ▼

AUD/CAD: 0.92 - 0.9350 ▲