Australian dollar drops amid risk-averse mood
Tuesday 25 September, 2018
Daily Currency UpdateThe Australian Dollar opened yesterday morning gapping lower against the Greenback at 0.7260 after having a stellar run the week prior. The AUD/USD pair failed to hold onto the high 72’s and with the domestic docket unable to offer any support the Aussie was sold off through the Asian session touching a low of 0.7252. As we entered the European session, the AUD/USD quickly regained power and climbed up towards 0.7278 however, the move was short-lived and once again risk was off the table and the Aussie pulled back down to 0.7250.
The local economic calendar is light today, in fact we have nothing due until Friday so its likely the Aussie will be driven largely by US action, and with the Fed set to deliver another interest rate rise this week the Aussie could test the low 72’s
Key MoversThe New Zealand Dollar retested the US 67 cent handle in trading overnight despite a quiet trading session with a lack of any data to start the week. With both Japan and China observing public holidays, liquidity was dampened with the Kiwi trading in a tight 20 point range for the majority of domestic play.
The NZD/USD eventual movements were lower, unable to breach 0.67, reaching highs of 0.6687 and drifting to lows this morning of 0.6637 following a bounce in the greenback after the implementation of new tariffs on Chinese imports.
This is little on the agenda today as the local market looks towards tomorrows Trade Balance and ANZ Business Confidence levels whereby last month households were upbeat about current conditions for the broader economy.
The sterling bounced overnight, recouping 0.7% against the greenback to touch 1.3167 whilst also rising 0.3% against the euro. The movements came as traders began to unwind their short pound positions following comments from Brexit secretary Dominic Raab reflecting his confidence a deal with the European union would eventually be struck. The moves ensured the pound was the best performing currencies when benchmarked against its G10 peers, impressive given Fridays 1.5% decline.
Risks are still skewed to the downside with the pound looking vulnerable as Brexit negotiations continue to roll on and Prime minister May’s leadership coming under increasing pressure. Key political events to watch for this week are the conservative annual conference and the opposition Labour party’s vote this week on whether to retain a second Brexit referendum as an option if May’s plan fails.
We only have second tier housing to watch out for through Tuesday and Wednesday with the GBP/USD likely to take its cues from FED commentary surrounding their monetary policy stance and USA Q2 GDP due Thursday. Thursday also sees ECB president Draghi and BOE Governor Carney deliver speeches before we get UK Q2 GDP and current account metrics on Friday.
Technical levels to consider for the GBP/USD are 1.3090 and 1.3030 as downside supports whilst on the upside, resistances are aligned at 1.3165 before 1.3275.
The Greenback is stronger this morning on a bout of risk aversion on news that China had cancelled trade talks with the United States ahead of the impending introduction of new US tariffs on Chinese imports. US bond yields continued to push higher ahead of the US Fed’s rates announcement on Wednesday night, with benchmark US 10-year yields rising to 3.09%. The Dow also finished the session in the red 26,562.05 -181.45 (-0.68%).
Looking ahead today and there are no scheduled releases in the US. All eyes will be on Thursday’s Federal Open Market Committee (FOMC) statement.
The Euro continues to challenge the 1.18 mark against the Greenback with a hawkish ECB statement driving the momentum. Opening this morning at 1.1746, the Euro initially rose 60 pips to 1.1815 but failed to hold above the level.
In what was a mostly quiet start to the week, the Euro did enjoy some relevant news with ECB Chair Draghi speaking at a European Parliament committee meeting. Draghi, mostly repeated much of the same message he said at the last press conference but added there was a “relatively vigorous” uptick in underlying inflation. The positive comment saw the Euro move above the 1.18 level although it failed to hold its gains.
On the trade front, Reuters reported that the EU’s Trade Commissioner Cecilia Malmstrom has cooled expectations on any rapid progress in the US-EU trade negotiations. She noted that the dialogue between the two economies is still in the “exploratory” phase, signalling any detailed progress would be at the trade meeting slated for early November.
Moving into Tuesday, the Euro enjoys another quiet day on the economic calendar with only a Consumer Confidence reading in the US to drive direction
The Canadian dollar moved within a 50-pip range on Monday between levels of 1.2910 and a high of 1.2955. We saw the release of Wholesale trade which came in better than expected rising 1.5 percent to $63.9 billion from an expected 0.4 percent. Sales in July climbed in four of seven subsectors, representing approximately 66% of total wholesale sales. Leading the gains were personal and household goods: food, beverage and tobacco; and motor vehicle and parts subsectors led the gains in July, while the miscellaneous subsector posted the largest decline. In volume terms, wholesale sales increased 1.2%.
The USD/CAD is holding above the 1.29 handle as market participants now seemed to hold back from placing any aggressive bets and prefer to wait for fresh updates on the North American Free Trade Agreement (NAFTA).
- AUD/NZD: 1.0850 - 1.1000 ▲
- GBP/AUD: 1.8000 - 1.8200 ▲
- AUD/USD: 0.7200 - 0.7300 ▼
- AUD/EUR: 0.6110 - 0.6220 ▼
- AUD/CAD: 0.9330 - 0.9430 ▼