The Australian Dollar (AUD) has been broadly stronger against most pairs this week but has generally underperformed this month. As risk markets turned, investors purchased the US Dollar and sold equities leading to the market travelling sideways. Softer CPI Chinese data for March published at 2.1% year on year versus 2.6% expectation bringing the Aussie off its highs across the board. RBA governor Lowe was hawkish when he said the RBA will keep rates on hold for a period of time, the next move will be a hike and may come as a “shock” to markets. The Australian Dollar (AUD) has found some much needed support Friday as the market turned to risk on.
The New Zealand Dollar (NZD) remains strong against a basket of currencies with risk appetite dictating markets. The kiwi came off its highs against the crosses running out of puff post FOMC minutes. Missile strikes in Syria look to be close to starting which helped to dampen stock and commodity prices. The Reserve Bank assistant governor McDermott spoke Thursday on the evolving inflation targeting over the past 30 years. Dr McDermott said: “Transparency in meeting our objective is as important for anchoring long-term inflation expectations now as it was in 1989, when the framework started. We will be using new communication techniques, such as publishing non-attributed records of meetings that reflect any differences of view among the Monetary Policy Committee.” “The New Zealand framework has changed significantly over thirty years, reflecting lessons learned and the changing economic and political environment. We are about to enter the next stage of that evolution”. The New Zealand Dollar (NZD) was unmoved during the speech. Markets await further Tweets from President Trump on the Syrian situation. The business NZ manufacturing index printed slightly worse than expected Friday suggesting a slowing manufacturing sector but made no dent in the surging kiwi.
The US Dollar (USD) has suffered further over the last few trading sessions with the US Dollar Index now trading just off its current three week low of 89.38. Trade wars are still on everyone’s minds as to how this will develop but has eased somewhat taking a backseat over the last few hours with Trump talking about launching missiles into Syria. President Xi’s speech Wednesday suggesting the doors are open for trading with China. The fact he never mentioned the ongoing trade disputes was seen as positive for the markets. The US Dollar received some love post FOMC minutes Thursday after US policy makers commented that raising rates would continue as forecast despite ongoing trade war signs. If a trade was developed the US Dollar (USD) would be under threat for a reasonably large sell off, which could in turn affect ongoing growth, clearly detrimental to any rate hikes. Debate is still ongoing as the whether the FED will raise rates three or four times in 2018 but all 12 participants were agreed on inflation to move upwards in the next 12 months. JP Morgan and CItibank both start the bank earnings today “Friday 13th”
UK newspapers have reported that UK submarines have moved within missile range of Syria to prepare themselves for strikes. These strikes could come very soon. Theresa May has not officially made her decision on whether the UK would join any pending airstrikes, I suspect she may not have a lot of time up her sleeve with Trump tweeting “get ready Russia” suggesting the missiles are “smart” and would evade Russian air defences. We should see the GBP continue to appeal to buyers but note volatility is still elevated with the ongoing Trump-US/ China talks still pending. Both UK industrial and manufacturing data disappointed coming in at 0.1% m/m versus 0.4% and -0.2% m/m against 0.2% respectively. Buying the Pound through to January 2018 levels of 1.4320 could be the way to go if near term resistance of 1.4270 is broken. Carney spoke Friday at the Canada Growth Summit, all he managed to do was to put everyone to sleep speaking on the future of economic growth, the Pound (GBP) was unmoved.
The EURO (EUR) remained Bid over the week against the US Dollar (USD) as buyers of the EUR took the pair to a high of 1.2395 in reasonably light trading conditions. The Dollar has been weak of late since a disappointing NFP figures Friday has kept the greenback on the ropes. We saw positive comments from ECB President Draghi who suggested inflation targets were moving in the right direction towards its target. He said as both the Euro-zone continues to strengthen, wages and inflation will continue to strengthen. This week we have lacked major economic releases, any volatility has been largely based off reports of a possible military strike in Syria. The ECB policy minutes swayed on the dovish side as the council agreed that their is not enough to suggest evidence that inflation is sustained. The news weighed on the EUR and took it down to 1.2300 before rebounding to 1.2330. German monthly (ZEW) economic sentiment prints Tuesday.
With markets turning from risk-on to a low appetite for risk, we have seen the Japanese Yen (JPY) strengthen. We saw more of the same rhetoric from the Bank of Japan Governor Kuroda who repeated his stance on continuing with their easing policy until the 2% inflation goal has been reached. Monetary policy head Eiji Maeda agreed suggesting the Bank of Japan (BoJ) may raise its interest rate targets before price growth reaches 2%. The Japanese Yen (JPY) travelled from a high of 107.30 against the US Dollar (USD) down to 106.65 where it sat for most of Thursday. It will be a quiet close to the week with economic data with all eyes on the Syrian situation.
The Canadian Dollar (CAD) is stronger on the back of Oil prices and risk sentiment. Movement has been consistent against the US Dollar (USD) since coming off the high of 1.3100 on the 19th March. Trading currently at 1.2580 it looks to make a test for the prior low of 1.2250 if risk sentiment remains. The FOMC minutes temporarily gave the US Dollar (USD) a short reprieve when the Fed signalled rate hikes would continue to be forecasted despite the ongoing trade war signs. Oil prices have improved from the 6th April low of 61.90 to a 3 year year of 67.15. President Trump warned Russia to prepare for airstrikes on Syria, with the Russian ambassador to Lebanon saying any missiles targeted to Syria would be shot down with potentially targeting the aircraft that fired them. Saudi Arabia have suggested they are concerned about the potential for war in the region as the Oil price rally’s 2% a high from December 14. As tensions intensify oil and the Canadian Dollar should benefit further.