Home Daily Commentaries Australian dollar weaker against the majors

Australian dollar weaker against the majors

Daily Currency Update

Having spent most of yesterday below the 0.7200 level the Australian dollar is slightly weaker again this morning when valued against the greenback. The Aussie reached a low of 0.7161 yesterday after the release of weaker than expected Westpac Consumer Confidence which fell by 4.7% in January after a modest 0.1% uptick in December.

Today will see the release of housing data (new monthly home loans) and the Melbourne Institute Consumer Inflation Expectations for January, previously at 4.0%.

From a technical perspective, the AUD/USD pair is currently trading at 0.7168. We continue to expect support to hold on moves approaching 0.7140 while now any upward push will likely meet resistance around 0.7210.

Key Movers

The New Zealand Dollar was one of the worst performers out of the G10 currencies on Wednesday falling just over 1% against the Greenback in the early European session. The NZD/USD pair moved off highs of 0.6830 down to a low of 0.6755, there wasn’t any obvious catalyst for the move lower, we saw a pick-up in US Treasury bond yields which may have prompted some long-unwinding of trades.

There are no scheduled economic releases today.

On the technical front, next line of support sits at 0.6720 and 0.6700. Resistance up at 0.6800 and 0.6820.

The GBP was volatile against the USD yesterday following the wake of the Brexit vote. Voted down by a record 230 margin yesterday, UK Prime Minister Theresa May has until Monday to work on a “Plan B’ and return it to parliament as she survived the no-confidence vote earlier this morning.

Defeating the motion raised by the leader of the main opposition Labour party Jeremy Corbyn, May said her government would continue to work on Brexit and find a way forward that was backed by the house. Market sentiment is towards the decrease in the prospect of a disruptive ‘no deal’ Brexit taking place, as a parliamentary majority is in favour of a softer Brexit, or no Brexit at all.

While the market awaits the March 29th deadline, the Pound sees further macroeconomic releases tomorrow that is expected to have a major impact on the currency. The Office for National Statistics will release its data on Retail Sales, outlining the change in the total value of inflation-adjusted sales at the retail level.

The Pound opened at 1.2895 against the USD this morning.

The US dollar index was largely unchanged on Wednesday as US retail sales were postponed as a result of the ongoing US federal government shutdown. The USD did claw back some its recent losses against riskier currencies, as AUD and NZD both fell 0.25% and 0.45% respectively against the greenback. AUD/USD opens this morning at 0.7185 with NZD/USD opening at 0.6785.

We did see second tier data in the form of the National Association of Homebuilders sentiment index which exhibited a mild rebound from 59 to 56 after Q4’s steep declines. With no sign of the government shutdown ending anytime soon, further delays of domestic data releases are expected.

Looking ahead we have a few Fed-Speak events, with Minneapolis Fed’s Neel Kashkari due to speak in New York early in the session with FED Vice Chair for supervision Randal due to participate in discussions in the New York afternoon. Neither of which are expected to materially move markets.

The Euro failed to inspire bullish confidences through trade on Wednesday struggling to extend moves above 1.14 amid escalating worries surrounding the euro zone growth outlook. Comments from ECB President Mario Draghi compounded concerns arising from softer than anticipated German growth data and forced the common currency through 2-week lows at 1.1378. Draghi adopted a characteristically cautious tone suggesting the broader European economy was weaker than first anticipated, damaging investors’ expectations for a normalization of monetary policy by August this year.

Despite a concentrated softening in US Fed policy the Euro has failed to extend gains and remains trapped amid a range bound cycle. Seemingly persistent softness across key growth indicators and little signs the broader economy will be lifted out of this sluggish growth reverie has forced investors to continually push back expectations for interest adjustments and policy normalization. With the gap between US and European monetary policy unlikely to close in the short term significant upside moves for the common currency are unlikely.

Attentions today remain with broader risk flows ahead of next weeks ECB policy meeting.

The USD/CAD fell to overnight lows of 1.3238 as higher oil prices were the catalyst for such moves as West Texas Intermediate prices steadied around US $52 a barrel. The Loonie saw gains following expectations of a decrease of crude oil inventories in the United States.

Overall the Canadian dollar ended up square for the day against the greenback as the pair continues to trade sideways this week in a tight trading range. Down a meagre 0.06% for the day, the USD/CAD is currently sitting at 1.3258 with resistance levels seen at this week highs of 1.33.

Domestically on the docket this evening sees the release of Canadian ADP Non-Farm Employment figures for the month of December. The previous month saw employment in Canada increase by 39,100 jobs

Expected Ranges

  • AUD/NZD: 1.0520 - 1.0620 ▼
  • GBP/AUD: 1.7750 - 1.8200 ▲
  • AUD/USD: 0.7100 - 0.7200 ▼
  • AUD/EUR: 0.6240 - 0.6320 ▲
  • AUD/CAD: 0.9350 - 0.9500 ▼