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FX News

FX Update: The USD continues to eye tax plan progress

Market Overview:

Although the US tax overhauls legislation remains struggling for support, continuing to impact sentiment on the USD, there was better news over the weekend on the trade front providing a more positive start to the week. The APEC Summit has seen the tentative agreement by 1 nations for a revamped TPP trade agreement to be known as the CPTPP This “refreshed” agreement minus the US and exclusion of a number of the more controversial clauses appears to be largely similar to the old TPP. Although the new agreement will now have to be passed by the individual 11 separate Governments before it can take effect, the outcome is positive for the Asian/Pacific trading bloc. Geopolitical concerns continue to simmer, with the war of words over North Korea continuing throughout President Trumps Asian visit, the US 3 Carrier fleet conducting exercises in the South China sea and a further statements on both trade and North Korea from President Trump expected on his return to the US on Wednesday. Read more

Foreign Exchange

Major Economies – 10 November 2017

Australia

The Reserve Bank of Australia (RBA) kept rates on hold at 1.5% as expected on Tuesday with RBA Governor Lowe indicating that the central bank will not change its growth or inflation forecasts. The Bank’s central forecast remains for inflation to pick up gradually as the economy strengthens, with employment as well as wage growth expected to improve over the period ahead.  Economic data out this week for the Aussie economy remains mixed with retail sales and inflation softer than expected but the labour market continuing to perform well, showing a period of consistent growth over the last 12 months. Read more

FX Update: The NZD recovery continues

Market Overview: 

The NZD recovery may be continuing but the US Non-farm payroll data released on Friday contained mixed messages. On one hand it was softer than the 310 K+ job gain expected coming in at a 261k gain, however the previous month of September was upwardly revised to a 90K gain instead of the earlier -33K loss. Also of a positive note was a fall in the unemployment rate from 4.2% to 4.1%, a level not seen since 2000. Wage growth was lower dropping from 2.8% to 2.4% pointing to the scenario of the scenario where steady growth continues with not a lot of inflationary pressure. Enough positives for a December Fed rate hike to all but assured. ISM non-manufacturing data for October was also solid, up to 60.1 pointing to a strong start to Q4 activity. On release of the NFP report, the USD rallied against both the JPY and EUR, and US equities markets made new highs. Over the weekend there were some interesting comments from China’s Central bank Governor, warning that China’s financial system is becoming significantly more vulnerable due to high leverage and that risks were accumulating that were “hidden, complex, sudden, contagious and hazardous.” Read more

Major Economies 27 October 2017

Australia:

There has been little respite for the AUD over the last couple of days, having dropped for 5 consecutive days from the 0.7823 high seen against the USD at the start of the week. It is now around 0.7650 after this afternoon’s PPI data came in below expectations at 0.2% against expectations of 0.4%….the AUD sold off around 20 points on this release. The AUD/USD looks poised for further declines having broken through the key 0.7730 support level after softer inflation outlook on Wednesday, with tonight’s US Q3 GDP figure likely to provide the catalyst. Longer term with no inflation pressure to pursue rate hikes focus turns again to RBA monetary policy divergence from that of the US Fed, the Aussie’s carry and yield advantage is diminishing and investors look to be correcting recent upside moves.  Read more

FX Update: North Korean missiles fly over Japan!

Overview
The eagerly awaited Jackson Hole addresses by central bankers, Yellen and Draghi on Friday night failed to meet market expectations around supplying clues to the timing of tightening moves. Rate hike comments were side lined as they both appeared to work in parallel to deliver a clear message on a different (and perhaps slightly less market-sensitive) topic: financial system regulation. Read more

Major Economies – 25th August 2017

Australia
In a week of little domestic data releases, the Australian dollar has been driven by offshore moves and has drifted lower after breaking below the 0.7950 support level on Tuesday, currently sitting around 0.7900 against the US unit. Of interest is that Moody’s reiterated Australia’s AAA rating with “Australia’s very high [fiscal strength] score is driven by a moderate government debt burden relative to AAA-rated peers and low cost of debt.” The dearth of economic news has left the AUD very much swinging on the waxing and waning at the mercy of the risk-off mood over the week, but the general tone is down and it looks to be back grimly hanging on to the 0.7900 mark after a run down to the 0.7865 level overnight. Read more

FX Update: The United States Dollar continues to struggle

Overview
Geopolitical risks continue to abate as concerns over North Korea take a back seat to the latest spate of terrorist attacks in Spain which have a more localised effect on financial markets. The markets  although still on edge, with South Korean/US war games beginning Monday, ended last week with a more risk-on tone and have begun the week with commodity currencies holding onto last week’s gains. U.S. stocks rallied on Friday from session lows — though they still ended the day down — after the White House released a statement that Steve Bannon would be leaving his job as chief strategist, capping a tumultuous week for the Trump administration. The rally that started after Trump’s election, the S&P 500 is still up 14% since early November — was launched on the belief that the president would cut regulations and lower taxes, boosting profits. But the embrace of Trump by investors and, until recently, CEOs, has always flown in the face of some of his other commerce-averse tendencies. Read more

Major Economies – 18th August 2017

Australia
Yesterday’s Australian July employment data was mildly positive, with unemployment steady at 5.6% although full time employment decreased by 20,000 on a seasonally adjusted basis. The Australian dollar has had a choppy couple of days ranging from 0.7806-0.7961against the USD. The employment figures pushed the AUD back over 0.7900 against the USD reaching highs in the 0.7950/60 level however it has had problems holding above the 0.7900 handle being hit overnight by the more the risk-off mood and falling equity market to drop back to 0.7880. The higher gold price has had little supportive effect. It has traded around the 0.7875/85 level for most of this morning but 0.7870 is immediate support and any break below that level will target 0.7830. Given the current risk tone we look for a test of lower levels next week. Read more