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FX Update

Howard Wilcox

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The Australian Dollar has underperformed over the last week, dropping against all major currencies and over 2.0% against the Pound. The RBA left their cash rate unchanged last week at 0.75% saying they would ease policy further if it was needed to sustain growth and rates would stay low for a considerable time. The RBA expects the economy to grow by 2.75% – 3.0% in 2020 and 2021 with signs of a turning housing market in Sydney and Melbourne starting to impact. The Bushfires and coronavirus will continue to weigh on the growth forecasts but employment is expected to remain at peak levels for some time. The slowdown in the Chinese economy from the ongoing impact of coronavirus will continue to impact Australian growth. RBA’s Lowe speaks Thursday, the only point of interest this week.

New Zealand

The New Zealand Dollar continues to head mainly south versus its peers as risks to the New Zealand Economy are slanted to the downside. The Reserve Bank of New Zealand meet Wednesday and should hold rates steady at 1.0% but the decision may be closer than we think. Back at the November policy meeting the RBNZ said they were in a data dependant mode with most data coming in positive since then such as business confidence and inflation as well as a drop to the unemployment rate from 4.2% to 4.0%. With that being said the ongoing implications and fallout from the coronavirus outbreak will certainly impact GDP figures and a possible cut in the April meeting.

United States

The US Dollar sits at the top of the chain of currencies as we head into this week’s busy trading calendar. Non-Farm Payroll figures Friday grew by an unexpected 225,000 for the month of January from 163,000 expected, making the last three month average a staggering 211,000. These figures will be keeping optimism at the Federal Reserve high as the currency pushes higher. US Fed chairman Powell testifies tomorrow and is expected to confirm modest growth in the US economy which provides further support for the big Dollar. Retail Sales prints later in the week.


Lagarde testified before the European Parliament’s Economic and Monetary Affairs Committee in Brussels saying the Greek economy is on the rise and eventually the European Central Bank will buy its debt under its asset purchase scheme. Lagarde also announced the ECB will launch a review of its monetary policy strategy. It’s been 16 years since a review has been undergone. With low interest rates and inflation reducing the scope for the ECB and other central banks to ease she feels the need to factor such things as globalisation and evolving financial markets into new policy. German prelim q/q GDP prints Friday.

United Kingdom

The British Pound was mostly sold off across the board last week as bears returned and the Pound came under pressure on the back of worry linked to the trade deal outlook between the UK and the European Union. The EU wants to toughen the deal draft prepared by Michael Barnier’s team at the European Commission to enable them to suspend any deal it makes. This move could give the EU power to resolve any disputes that arise quickly and favorably than they otherwise would. January Services data showed positive numbers with a recovery in the UK Services sector expanding at a quicker pace to the end 2019 – improved consumer and business confidence should transpose into a solid 2020.

Major Announcements last week:

  • RBA keep cash rate unchanged at 0.75%
  • NZ Unemployment drops to 1.0% from 4.2%
  • US Non Farm Payroll publishes at a solid 225,000 for January
  • Canadian Unemployment Rate drops to 5.5% from 5.7%

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