FX News

Australia

More positive data has supported the Australian Dollar with key employment data Thursday doing the business. Wages (Wage Price Index) rose 0.6% in the quarter to September and 2.3% y/y with statistics showing improved labour market conditions and the official unemployment rate dropped from 5.1% to 5.0%. Jobs rose 32,800 in October compared to 20,000 markets were predicting led by full time jobs participation. The RBA has kept the cash rate on hold at 1.5% for over two years now, although they have recently acknowledged stronger employment and reasonably quick economic growth. The Australian pushed higher on the releases across the board reaching a five week high 0.7280 against the US Dollar. With recent falls in Crude Oil prices falling to below 60.00 the Australian Dollar has been sensitive to these downward moves as the economy is commodity based. With monetary policy minutes on Tuesday we should see further hawkish bias based on this week’s positive data.

New Zealand

The New Zealand Dollar is still riding high on last week’s strong employment figures, the best performing currency across the eight major players since the 7th of November. US Equity markets have declined in value over the week, but the kiwi has remained staunch. Better than expected Chinese data Tuesday boosted risk sentiment when Industrial Production released at 5.9% after 5.8% was forecasted. The fear though is that the with deadlines approaching on trade tariffs, manufacturers have boosted production to avoid the new levy in January skewing the figures from potentially a weaker result. The main event news this week has been with Brexit updates, affecting risk sentiment during Wednesday’s overnight sessions but able to break the kiwi into any sort of bearish mood which was highly unusual.   Read more

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Markets are still figuring out what it all means post US elections and Fed policy announcement. Initially the reaction has been mixed but with a general US Dollar up theme and risk on markets. We are still looking at Fed policy normalisation at a time where there is heaps of downside risks including global trade. Any downside to equity markets and sentiment from here will not bode well for risk associated products and could bring back topside failures in major currency pairs. With a US Holiday Monday celebrating veterans Day markets should ease into the week. The New Zealand Dollar was the standout performer last week with unemployment dropping to a 2008 low of 3.9% from the 4.4% markets were expecting. With risk factors this week expected to drive price action we could see the kiwi ease back towards last week’s open of 0.6650 levels.  EU and UK negotiators are close to a breakthrough with both sides aiming to get political approval on the Irish border backdrop. President Trump has upset fire besieged California when he tweeted about the mismanagement of forestland and threatened to cut federal funding to the state. Fires in southern California have killed more than two dozen people and destroyed over 6,500 buildings forcing the evacuation of over 250,000 people. The fires are the worst in California history with Trump expressing no sympathy for those caught in the fires, instead using the catastrophic event to criticise the state’s environmental regulations. We have several key data releases on the economic docket but geopolitical news could influence shifts in currencies the most. Read more

Australia

Tuesday’s RBA cash rate announcement turned out as we predicted summarising recent rhetoric regarding monetary policy and retaining the current rate at 1.50%. The current rates are consistent with sustainable economic growth which has been revised up for 2018 and 2019. The RBA also think the unemployment rate will reduce to around 4.75% in 2020 with a lift in Wage growth. The elephant in the room was the ongoing pessimistic view of the housing market. The RBA is becoming uncomfortable with the declines in Sydney and Melbourne prices. If credit tightens we could certainly see values go south putting a squeeze on consumer behaviour. US Midterm election voting caused market volatility Wednesday but as results were published suggesting the Republicans would retain control of the senate risk markets improved and the Australian Dollar posted fresh highs.  Read more

This mornings NZ Jobless rate has pushed the NZD/USD to a 3 month high of 0.6732.

Figures releases today at 10.45 has seen the NZ unemployment rate plummet from 4.4% to 3.9% surprising markets, the lowest level since August 2008. Reflecting a sharp drop in the number of unemployed was the increase in the number of employed people jumping from 0.5% to 1.1%. One would expect the monetary policy statement tomorrow to now be quite hawkish. The NZD/AUD has jumped to trade above 0.9300.

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Australia

Choppy conditions this week have seen the Australian Dollar bounce around, but a strong rally in the past 24 hours has seen the AUD currently trade just over 0.7200. Generally the Aussie Dollar has held its value on the crosses over the week with only the NZD really making gains. Australian CPI figures printed down on expectations around 0.4% from the 0.5% markets were expecting highlighting inflationary pressures remain weak. According to Aussie stats consumer price inflation grew only 1.9% to September down on the 2.1% growth through to June. Weak Chinese manufacturing data put added pressure on the Aussie along with end of month repositioning of off balance sheet risk. But then trade Balance data boosted the Aussie Dollar Thursday when figures reported a 3.02B surplus based on markets expectations on 1.71B.  Attention is now on Australian Retail Sales today and US Non-Farm Payroll tomorrow morning to close the week. Read more

Australia

The Australian Dollar continues to drift lower across the board, perilously close to long term support of 0.7040 against the US Dollar Thursday. If we see further weakness, through 0.7040, due to risk averse market sentiment we could expose key support at 0.6800 levels. Equities have affected price action over the past week or so, the 3 main indices falling over 5%. Australia was upgraded to AAA this week by Fitch as they expect Aussie GDP to be 3.3% at the end of 2018, 2.8% in 2019 and 2.7% in 2020. The government deficit is expected to drop to 0.4% of GDP by 2020. This week sees zero economic data to comment on with the overall risk off tone expected to continue. Next week’s quarterly CPI and Retail Sales will be key with Core CPI forecast to print 0.3% showing annual pace to drop back to 1.8% from 1.9% y/y.  

New Zealand

With little in the way of local led economic data the New Zealand Dollar has been restricted to mainly range bound movement. Risks adverse conditions have dominated markets with equities falling again continuing last week’s bearish mood. We think the kiwi should be weaker than it is, particularly against the US Dollar and with the massive drops in stocks, but it has shown remarkable resilience considering. NZ’s Trade Balance for September released at a deficit of 1.6 Billion the largest deficit on record. Imported petroleum products such as crude oil and a heavy weighing in exports of dairy and beef at a low point in the season contributed to the high deficit number. With NZ Business confidence down of late, hinged to the new labour government all eyes will be on the ANZ Business Confidence poll result releasing early next week. With better than expected figures last month based on improving employment and residential construction hopefully this will continue. Read more

Australia

Healthy September jobs data yesterday showed that the unemployment rate hit a seven-year low, dropping to 5% in September on the back of the continuing jobs boom in Victoria and NSW. Employment increased by only 5600 jobs in seasonally adjusted terms, but the 0.3%  decrease in the number of people looking for jobs was also a factor in the overall unemployment rate falling from 5.3 % in August. The participation rate fell from 65.7% to 65.4 %, the lowest level in 11 months. This stronger than expected result, would have come as a surprise to the RBA who had forecast an unemployment rate of 5.25 % to June 2020, reinforcing the view that the next cash rate move from the RBA is likely to be up not down. The Aussie dollar firmed after these figures, rising to 0.7132 against the Greenback. In the prevailing risk-off tone the AUD has struggled to hold onto yesterday’s gains and this morning is trading down around 0.7095. Given that the Australian equity market is trading down we look for the AUD to remain under selling pressure especially if this afternoon’s Chinese GDP, retail sales and Industrial production data disappoints. Next support level is 0.7085 but look for test of 0.7000 over next week.

New Zealand

Little in the way of economic data to drive the NZ dollar in the back end of the week.

Migration data released this morning, showed that net monthly migration slowed to 4,640 in September, the lowest monthly net inflow since 2014. That translated to annual net inflow of people into the country falling to 62,700 – the lowest level since October 2015.  Expectations are that migration will continue to ease back over the next few years, pulling population growth down in the process. This reinforces our forecasts for a period of soft demand growth over the coming years.

The NZ dollar has held up reasonably well over the week in the face of a firmer USD, making a high of 0.6598 on Wednesday, but has now drifted back to the 0.6530 level against the Greenback and will remain under pressure if the current risk-off sentiment prevails, another test of the 0.6500 support level looks likely next week. Read more