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UK Elections take centre stage

By BRETT OTTAWA

The Australian dollar rally this week eventually abated after strong movements above the 0.75 handle this week. Opening at middle ground of 0.7550 on Thursday, the release of Trade Balance figures was the catalyst for Aussie dollar downside progression to intraday lows of 0.7525. Trade balance figures showed a surplus of $555m for the month of April, sharply down from the previous month surplus, with a slump in coal exports the main driver. AUD/USD cross moved sideways for the majority of the session as U.K. elections took focus by major markets around the world. Despite climbing back to an overnight high of 0.7550, movements were seen back into the Greenback as exit polls in the UK start filtering through to the market. The AUD/GBP cross is the major mover of the day up 1.3% on writing to 0.5890. The Australian Dollar moved lower immediately this morning by twenty-five pips to 0.7525 against its US counterpart as we expect heightened volatility in the lead up to results in the UK general election.

The Great British Pound traded flat for the first half of yesterday’s session until the beginning of European trade where the Sterling came under some selling pressure against the US Dollar. The GBP/USD moved from levels of 1.2977 down towards 1.2908 as traders squared out of long positions ahead of the UK election. The polls have now closed and as we open this morning in Australasia the pair has gapped considerably lower buying 1.2745 at the time of writing after a shock exit poll suggesting the Tories will fail to win a majority. GBP/AUD also lower buying 1.6950 and against the New Zealand Dollar 1.7785 . Markets will be closely watching the results as they unfold live throughout the day, will Theresa May and the Conservative Party continue to lead the UK or will Jeremy Corbyn and the Labour Party pull off a surprise. In other news, a raft of economic releases are due starting with UK Manufacturing Production and Goods Trade Balance. 

The NZD shrugged off macro-economic events overnight to break through 0.72 and reach a high of 0.7222. Currently trading at 0.72, the Kiwi’s slow grind upwards continues to outperform despite a lack of strong momentum and global risk events. The Kiwi now turns to a loaded US economic data docket for further direction. Over in Australia, the Aussie continues to hold its gains against the USD ultimately leaving the NZD/AUD rate at a steady 0.9550 this morning. All eyes now turn to the on-going UK election with a surprise result plausible. With the exit polls signalling a potential hung parliament, the NZD/GBP currently trades at 0.562. 

Overnight in the US, the greenback moved slightly higher after former FBI Director James Comey gave his testimony to a Senate Committee raising questions about whether US President Donald Trump obstructed justice in his interactions with the former FBI director. In the Eurozone, the European Central Bank left its benchmark interest rate unchanged at 0.00%. The message from ECB president Mario Draghi was that the risks are still ’tilted to the downside’. The EUR/USD pair is currency trading at 1.1205. We now expect support to hold on moves approaching 1.1170 while any upward push will likely meet resistance around 1.1250. The US Dollar advanced for the second consecutive day against the Japanese Yen. The USD/JPY reached an overnight high of 110.38 and is currently trading at 110.06.