Home Daily Commentaries The Australian dollar flat ahead of RBA Monetary Policy Meeting Minutes.

The Australian dollar flat ahead of RBA Monetary Policy Meeting Minutes.

Daily Currency Update

The Australian dollar yesterday traded in a tight range between 0.7168 and 0.7186. Although the Aussie dollar was flat the broader theme for the session was US dollar weakness. US equity markets fell on Monday the Dow Jones Industrial Average was down 400 points (1.68%), and on track to close at its lowest level since the beginning of April. The S&P 500 and the Nasdaq were both lower by about 1.7%.

On the release front today in Australia we will see at 11.30am AEDT Housing Industry Association (HIA) home sales for November. As well as Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes.

From a technical perspective, the AUD/USD pair is currently trading at 0.7175. We continue to expect support to hold on moves approaching 0.7150 while now any upward push will likely meet resistance around 0.7210.

Key Movers

The New Zealand Dollar held steady to start the week after once again testing three-week lows overnight. Opening just under the 68 US cent handle, the kiwi drifted to an intraday low of 0.6785 following a risk-off tone as movements were seen back into the Greenback ahead of Thursdays Federal Reserve policy meeting.

While markets are pricing in the likelihood of a fourth interest rate rise by the Central Bank in the United States, the NZD/USD managed to claw back the small dip in trading through local trade to finish higher above the US 68 cent handle.

Of interest this morning is the release of ANZ Business confidence survey as the New Zealand Dollar opens this morning at 0.6805.

The GBP took a breather during yesterday’s trading session after a volatile last week. The Pound rose to break through the resistance ceiling of 1.26, and open at 1.2618 against the USD this morning. The volatile week was in response to events surrounding Brexit, with PM Theresa May surviving the confidence vote. For now, the Pound looks to have steadied itself against other major currencies with a lack of fresh data regarding Brexit.

Tomorrow the UK Office for National statistics will release their data on CPI and PPI. These indices are considered the UK’s most important inflation data because it’s used as the central bank’s inflation target. Expected to have a high-medium impact, a figure above the forecasts of 2.3% and -2.8% respectively, will be good for the currency.

The US dollar paired gains enjoyed into the end of last weeks close, edging back from 18/19month highs ahead of tomorrow’s Federal Reserve policy meeting. While the FOMC is expected to raise interest rates for a fourth time this calendar year markets are looking to a shift in commentary and forward guidance as a primary driver of short term direction. There has been a rapid repositioning over the last 6 weeks as speculative bets lowering the number of 2019 interest rate hikes has cut long dollar plays allowing the Euro to bounce of recent lows and push back through 1.1350.

Markets appear increasingly convinced the FOMC is preparing for a pause in the recent cycle of tighter monetary policy and have corrected expectations accordingly. Global financial market instability and the ongoing US/China trade dispute are beginning to weigh on US growth outlooks. Falling almost half a percent the dollar fell through 113 JPY while testing 0.99 against the CHF.

Attentions now turn to commentary from President Xi Jinping as he addresses attendees at the Central Economic Work Conference. Any insight into trade policy may help alleviate broader market concerns and bolster risk appetite leading into the festive season.

The Euro appreciated 0.3% in overnight trading, touching 1.1350 before settling slightly lower at 1.1345 this morning. This is, despite another broader risk-off tone witnessed in global equity markets and a poor PMI result last week.

While the broader outlook continues to weaken, the EU was boosted by news that the populist coalition Italian government has settled on a 2.04% fiscal deficit target for 2019. The Deputy Prime Minister Salvini announced, “We’ve reached agreement on everything”.

While the European Commission is yet to ratify the proposal, the watered-down deficit target certainly reduces the risk of financial penalties for Italy. Italy has had a dampening effect on the Euro for some time now and the agreement shored up Euro support amid a weakening global outlook.

Moving into Tuesday the Euro is set to enjoy another quiet day on the economic calendar. Investors will look to the headlines for direction.

The Canadian Dollar continued its decline overnight as it finished 0.2% lower against the US Dollar. Declining oil prices again by 2.4% for US crude overnight and a 14 month low did no favours for the Loonie as the USD/CAD rallied through the 1.3400 handle after opening the week at 1.3382.
Foreign Securities purchases for the past month totaled $4.0 billion in October, down from $7.8 billion in September, and showing a net outflow of funds for the Canadian economy as reported.

With the Canadian Dollar continuing the struggle, market participants will be hoping for positive sentiment from the release of manufacturing sales this evening as the USD/CAD opens this morning at 1.3407.

Expected Ranges

  • AUD/NZD: 1.0500 - 1.0600 ▼
  • GBP/AUD: 1.7500 - 1.7720 ▲
  • AUD/USD: 0.7120 - 0.7200 ▼
  • AUD/EUR: 0.6300 - 0.6360 ▼
  • AUD/CAD: 0.9600 - 0.9700 ▲