Aussie locked in neutral territory despite recovery in Gold prices.
Monday 28 May, 2018
Daily Currency UpdateThe Australian Dollar enjoyed another day of mixed fortunes to ultimately close out the week slightly higher against the USD at 0.7549. The Aussie battled through the session holding firm above the 0.7540 support level and reached a high of 0.7589 on the back of higher commodity prices and a revival in risk appetites. However, fortunes reversed sharply when US President Trump again tweeted his thoughts, sending traders into risk-aversion territory.
Initially driven by positive headlines from the worlds’ two biggest economies, the Aussie enjoyed a potential wind-down of US, with Chinese trade tensions leading to a sharp, albeit brief, recovery. The AUD was also given a leg-up with mixed commodity prices. Gold recovered above the 1,300.00 threshold as Crude Oil retreated sharply after hitting multi-year highs. Ultimately however, the positive sentiment was to reverse as the brakes were applied by President Trump who tweeted his unhappiness with on-going developments with China.
Closer to home, the economic calendar was relatively bare to close out the week and remains light to close out the month of May. Traders now find the pair locked in neutral territory with the bears and bulls battling for direction. The Aussie now looks to enjoy a few days of respite from the economic data releases with the first note-worthy release due for Wednesday.
Key MoversThe New Zealand Dollar ended up square for the week after opening at 0.6920 against US Dollar the previous Monday as heightened geopolitical risks and trade war tensions continued.
With on-off chatter around a summit between the United States and North Korea, the Kiwi has remained relatively calm trading sideways into the weekend and looks to stabilize above the 69 US cent handle.
A weaker United States durable order print on Friday evening heading into Memorial weekend should ensure the NZD remains above its close levels of 0.6915 ahead of a quieter day on the market with public holidays observed both in the US and UK.
With little on the domestic docket today markets look towards the latest six-monthly RBNZ Financial Stability Report released on Wednesday which will give insights into the central banks views on current macro-prudential indicators.
The New Zealand Dollar opens this morning at 0.6920.
The Great British Pound closed the week weaker against the Greenback on the back of the second estimate of UK GDP for the first quarter of the year, which came in unchanged at 0.1%, further denting chances of a rate hike in the second half of this year.
The Pound Sterling hit a low of 1.3295 which was a new low for the GBP/USD pair in 2018. Looking ahead today the macroeconomic calendar is light with the UK Bank Holiday.
From a technical perspective, the GBP/USD pair is currently trading at 1.3304. We continue to expect support to hold on moves approaching 1.3270 while now any upward push will likely meet resistance around 1.3330.
US government debt yields continued to drop offshore on Friday after the Federal Reserve signalled earlier in the week through the release of their monthly minutes that they could allow inflation to run above its target of two percent. The yield on the 10-year Treasury note fell to 2.93% while 30-year Treasury bonds were lower at 3.09 percent. Adding to the decline was a drop in oil below $80/bbl after Saudi Arabia and Russia said OPEC and its allies may boost oil output in the second half of the year.
Equites were mixed with yields lower and USD stronger. Energy shares were leading the decline, the S&P 500 and DJIA were down 0.2%. Gold prices were lower but still managed to close above the psychological level of $1300 while holding on to its gains for the week
Looking ahead US data takes centre stage this week, a raft of first-tier US economic data including non-farm payrolls, PCE, ISM manufacturing, and the Fed’s Beige Book should indicate US growth leadership, keeping the USD and US yields supported.
The Euro closed the week almost 1% lower versus the USD amid political concerns over the leadership situation in Italy and now also Spain.
Mariano Rajoy, prime minister of Spain, has been recently under pressure by the opposition, who called a vote of no-confidence following the National Court conviction of former government officials who were running a multimillion illegal racket.
EURUSD finished the week trading around 1.1645 but is now opening the week stronger following weekend developments in Italy where President Sergio Matarella rejected the populist Five Star-League alliance’s choice of a Eurosceptic as economy minister. EURUSD is opening in the Aisan session almost +0.27% higher, very close to next resistance at 1.1690.
The loonie lost more than 0.7% versus the dollar on Friday session, following news that Saudi Arabi is expecting OPEC and partners to increase oil supply later this year. Oil felt the most in almost three months, driving USDCAD to the high’s 1.2970s.
NAFTA news also continued to influence the USDCAD, with some reports citing Prime Minister Trudeau concerns about a US investigation on automobile imports. Also, it was highlighted that he agreed to stay in close contact with Mexican president Enrique Pena Nieto.
The loonie is opening flat in the Asian session today with USDCAD trading around 1.2972.
- AUD/NZD: 1.0880 - 1.0980 ▲
- GBP/AUD: 1.7530 - 1.7750 ▼
- AUD/USD: 0.7500 - 0.7610 ▲
- AUD/EUR: 0.6430 - 0.6510 ▲
- AUD/CAD: 0.9770 - 0.9850 ▲