The Australian Dollar (AUD) strengthened on the RBA announcement Tuesday. Leaving the Cash rate at a record low of 1.5% the RBA remains optimistic regarding growth and rising inflation. Lowe said a lower unemployment rate and low interest rates will give weight for the next move will be upwards, not down, but overall market economists are expecting 2019 to be a more productive year. GDP released weaker than expected soon after and took the Aussie (AUD) off its highs to 0.7770. Monthly Trade Balance figures were released Thursday at 1.06B from expectations of 0.21B nudging the Aussie to a fresh high of 07830.
The New Zealand Dollar (NZD) pushed off lows over the week as risk returned to the markets. US President Trump acknowledged possible progress with North Korea after word that they were willing to negotiate its stance on nuclear weapons. Markets reacted positively squeezing the New Zealand Dollar (NZD) half a cent higher against the greenback up over 0.7300. The Global Dairy Auction this week showed dairy prices dipped -0.6% to reach an average of 3,593.00, clearly a blow to milk producers as the farm gate milk price sits at 6.40 with expectation of this going higher later in the year. No further local date to be released over the rest of the week, we can expect plenty of the usual volatility around Non-Farm Payroll early Saturday morning.
A busy week for the US Dollar with a myriad of data releases and Trump again taking centre stage. US Tariffs are the talking point with Trump announcing stiff tariffs on Steel and Aluminum products. The White House announced there could be exemptions with Canada, Mexico and other countries as the fear of a trade war could start with the US President ready to sign something as early as the end of this week. Trump argues that other countries have been taking advantage of the US for decades and sees these measures as necessary to decreasing the US trade deficit. Gary Cohn Trump’s top advisor has resigned following the news of Trump’s bold Tariff moves as he was strongly opposed. Cohn’s departure comes at a time when Trump is clashing with many other top republicans including the house speaker Paul Ryan. The US Dollar Index is back under 90.00 trading at 89.64. Markets await the monthly market bomb that’s Non-Farm Employment tomorrow.
The British Pound (GBP) has dipped sharply over the week. It’s been the worst performer against the greenback sliding to 1.3780 as Bank of England’s (BoE’s) Haldane spoke midweek. Tensions are still growing between London and Brussels as the Brexit deadline looms closer. We have witnessed two aggressive exchanges releasing the legal framework on how Brexit would work. Market players seem to be slowly warming to the Pound (GBP), appearing optimistic that GBP has the ability to trade a lot higher on minimal positive news given the current decline seems to be mainly Brexit driven.
US Dollar strength took the EUR back to its pre-weekly open start of 1.2300 Friday after further talk of Tariffs weighed on markets. President Mario Draghi gave his ECB speech Thursday and said subdued inflation and confidence could be hurt by trade conflicts. The ECB has cut its inflation forecast to 1.4% from 1.5% while Draghi said they were closely watching market volatility and the appreciation of the EURO (EUR). Draghi went on to say the ECB would intervene more aggressively in buying of bonds if the eurozone struggled to recover from its debt crisis. The EUR could reverse back some of the way to 1.2420 as 1.2300 the figure is the 50% retracement level from the high of 1.2450.
The Japanese Yen (JPY) is trading slightly higher than its weekly open against the US Dollar. Markets have generally been risk off as Trump messes with trade tariffs and this has seen the safe haven JPY higher against the greenback. Japanese current account data printed well midweek but was forgotten as investors bought the USD Dollar in favour of taking on risk. The ongoing uncertainties with the Trump Government this week and the mere mention of the Bank of Japan exiting from QE should ensure the JPY will gain more support going forward. Currently the JPY is trading near long term support levels of 106.20, parity is not far away and in jeopardy of being broken. BoJ Monetary statement is released later on Friday.
The Canadian Dollar (CAD) has remained at its lows over the week settling in a range between 1.2900 and 1.3000 in shaky markets. Canadian data released has been better than expected. Both Housing starts and Building Permits printed better than expected but failed to spark any Loonie (CAD) revival. President Trump’s comments regarding Canada being possibly exempt from tariffs is exceptionally good news for Canada with 80% of their products ending up in the US. The Federal Reserve is widely expected to raise rates 4 times in 2018, the Bank of Canada will not likely be able to keep up with this pace putting huge pressure on the Canadian Dollar. Physiological resistance at 1.2900 should come into play very soon and once the pair breaks this key level 1.3780 long term resistance is not so far away. Crude oil sits at just over 60.00 per barrel and may look to test 60.00 again.