Home Daily Commentaries Aussie falls on global risk appetite

Aussie falls on global risk appetite

Daily Currency Update

The Australian dollar has been outperforming so far amid a backdrop of reviving risk appetite in global markets, with oil prices and global stocks trading higher overnight. In the last 24 hours the Australian dollar is relatively unchanged against the Greenback trading a high of 0.7275 before settling down once again around 0.7230. The main talking point overnight was the overnight fall in Iron ore prices, $64.25 a tonne, with the benchmark price recorded is largest decline since April 12 last year.

A quiet day ahead for the Aussie with no scheduled releases locally. However attentions will turn to this afternoon’s China industrial profits for the month of October.

From a technical perspective, the AUD/USD pair is currently trading at 0.7213. We continue to expect support to hold on moves approaching 0.7200 while now any upward push will likely meet resistance around 0.7276.

Key Movers

The New Zealand dollar is slightly stronger when valued against the Greenback sitting just below 0.68 cents, close to where it ended last week. On the local release front yesterday Q3 retail sales data yesterday was much weaker than expected, coming in at flat for the quarter, but there was only a short-lived impact on the kiwi.

Looking ahead today on the release front, and all attentions turn to New Zealand Monthly Trade Balance with market expectations of a 850 million trade deficit.

From a technical perspective, the NZD/USD pair is currently trading at 0.6784. We continue to expect support to hold on moves approaching 0.6756 while now any upward push will likely meet resistance around 0.6810.

The Great British Pound was steady to start the week after moving higher during the local session as markets digested the implications of a confirmed Brexit deal with the European Union.

Opening the morning just above the 1.28 handle, cable remained steady into during Asian trade as Sterling was buoyant in its move to an intraday high of 1.2863 overnight. As Prime Minister Theresa May signed off the withdrawal agreement on the weekend, EU member advised this is the only deal on the table possible.

Moves are likely to be capped in the short term as parliament in the UK votes on December 12th for the Brexit vote to proceed. Sterling was eventually sold down to pair all gains as it failed to capture any momentum which suggests markets are pricing in the possibility of the vote not passing.

Heightened volatility is expected as market participants react to any news till then as the GBP/USD pair opens this morning at 1.2808.

The US Dollar index seesawed through Monday’s day of trade. Having initially opened just under the 97.00 mark, geopolitical tensions rose on the back of this weeks planned meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the G20 summit in Argentina where they are expected to meet separately to discuss a possible trade deal. The DXY dropped to 96.66 before a rebound in U.S stocks at the close of the day saw the Index claw back losses at close the session at 97.10.

In other news, the USD/JPY has climbed 113.64, the highest level since November 15 and the best performance in more than a month.

On the commodity front, oil settled higher with U.S prices posting their biggest one-day rise in eight weeks after suffering their worst session percentage loss in three years. Light crude oil futures settled at $51.63 a barrel.

The economic calendar sees of Fed members Clarida and Bostic speaking along with the release of CB Consumer Confidence.

A busy sessions for the Euro overnight in terms of risk sentiment, central bank speak and political developments. European equity markets rallied over 1% on the day on Monday, largely driven by a 3% rise in the Italian index following conciliatory comments from the Italian government regarding their 2019 budget targets. The government has been warring with the European commission over their deficit targets for the 2019 budget with the commission describing current targets as a breach of its rules. The news that the Italian government was willing to adjust these targets was welcomed by markets, forcing Italian bond yields sharply lower with the 10-year falling almost 15 basis points on the news. Currency moves were more constrained as the EUR/USD pair round-tripped from 1.1330 to 1.1380 before giving back most of these gains. It is currently oscillating around the 1.1340 handle heading into Tuesday’s Sydney session which is shaping up as a light one for European markets.

Recapping yesterday’s events, we heard European Central bank President Draghi’s optimistic commentary on Eurozone growth and inflation levels whilst also receiving Germany’s business climate survey. Draghi pointed to the slowdown in recent data as being more pronounced than expected and also noted that uncertainties such as protectionism also remain elevated. Despite this, he maintained that the economy was still ticking along in line with the central bank’s projections which are aiming for bond purchases to end in December. The German IFO business survey was weaker than expected, largely in line with a string of disappointing macroeconomic data out of the eurozone. The business climate reading fell from 102.9 to 102.0 in November, slightly missing market expectations of 102.3.

Today’s session is virtually empty for the Euro as we only have second tier US data in the form of consumer confidence and house prices. As discussed yesterday, the key risk events for the week are delivered on Friday through October core CPI and the October unemployment rate. Both reads are historically market movers, we expect any deviations from expectations to inject some volatility into the Euro.

Technical levels to consider moving into today are 1.1300 before the august and October lows of 1.1216. On the topside, areas of resistance are seen firstly at the November high of 1.1500 with the 1.1529 level also seen as a point of key technical resistance.

The Canadian dollar offered little of note through trade on Monday, edging marginally lower amid broader softness across G10 currency markets. Risk appetite improved as equities, bond yields and oil all bounced off Friday’s low and helped prop up the CAD above 0.7540. Having maintained a tight 40 point range for much of the day the Loonie appears to have fought off a break below 15 monthly lows and 0.75. A move below this handle may prompt a deeper correction toward 0.7290/0.7300.

With little of note on the macroeconomic docket attentions remain affixed to broader risk trends and fluctuating oil prices ahead of this weeks G20 summit and the December 6th OPEC meeting. Any agreement between the world’s major oil producers should help foster a modest recovery in oil prices moving into 2019 and help fuel renewed demand for the CAD.

Expected Ranges

  • AUD/NZD: 1.0610 - 1.0780 ▼
  • GBP/AUD: 1.7480 - 1.8050 ▼
  • AUD/USD: 0.7150 - 0.7330 ▲
  • AUD/EUR: 0.6280 - 0.6440 ▲
  • AUD/CAD: 0.9525 - 0.9650 ▲