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All eyes will be on RBA meeting Tuesday

BY BRETT OTTAWA

The Australian dollar edged marginally lower through trade on Friday testing key supports and touching intraday lows at 0.7459. With little domestic data on hand to drive direction, the AUD bounced off lows as investors issued a temporary defence on moves at or about the current 100 day moving average and 0.7460/70. The Aussie has been entrenched in a downward spiral over the last 5 – 6 weeks and while the speed of the downturn seems to have abated somewhat the commodity driven unit is still vulnerable to further downside risks. Attentions this week turn to key central bank announcements with the RBA meeting Tuesday and the FOMC sitting Wednesday important markers for short-medium term direction. While both central banks are expected to maintain their current monetary policy platforms there is scope that a hawkish Fed may underpin further Greenback gains and force the AUD lower.

The New Zealand Dollar has had another unfortunate week when valued against its US Counterpart and closed the month of April at a ten-month low at 0.6838 - a level not witnessed since June 2016. Despite a weak Q1 US GDP print, the Greenback moved 3% higher last week against the Kiwi as growing concerns about U.S protectionist policies. The U.S government announced stricter tariffs on softwood lumber imported from Canada and believe it is just a matter of time before the U.S takes against their trade, in particular the dairy market.  Looking ahead, local data is light until Wednesday where we will see the release the employment figures. 

The Great British Pound edged higher through trade on Friday consolidating gains above 1.29 and ensuring the current relief rally remains intact. Sterling rallied strongly throughout April and despite meeting short term resistance in near term holding patterns could break through 1.30 should the Fed fail to expand on its hawkish base and proffer a clearer path to monetary policy changes. A decline in consumer spending and slowdown in first quarter GDP could force the FOMC to maintain a cautious stance, especially if non-farm payroll numbers fall short. Having enjoyed strong gains on the back of the French election result and the announcement of a local election later this year the Cable could mean a consolidated push through 1.3100 while a close below 1.2860 may force a correction back toward supports at 1.2680. Attentions this week turn to the U.S Federal Reserve and Non-Farm Payroll numbers with Manufacturing, Services and Construction PMI dominating local direction.  

The US dollar closed the week up against commodity-related currencies. The AUD/USD pair fell to its lowest since early January settling at 0.7481 after reaching a low of 0.7467. There were mixed fortunes for the Greenback against the Euro. The EUR/USD pair reached a fresh high of 1.0910. The EUR/USD is currently trading at 1.0901. We now expect support to hold on moves approaching 1.0855 while any upward push will likely meet resistance around 1.0910. Due to the Labour Day public holiday there are no data releases for today. The pound sterling managed to extend its rally against its US counterpart reaching a high of 1.2942. The GBP/USD pair is currently trading at 1.2928 with all eyes on the psychological barrier at 1.3000. On the US data front, attentions today will turn to the release of US Manufacturing PMI for the month of April.