- USD remains subdued
- AUD downside limited on local data
- Euro flat but pound supported
The political impasse in the US has kept most risk assets under pressure, but most importantly has also weighed on the USD. This has resulted in a flight to safety, with the yen and gold being the biggest beneficiaries. The AUD has been rallying since the RBA maintained a neutral stance & failed to warn on recent FX appreciation. Risk currencies have actually been quite resilient considering the magnitude of the situation.
AUD downside limited on local data
AUD/USD is holding in its new trading range between 0.93-0.95 and is actually closer to the top end of that range. We feel downside for the AUD on local economic data is limited at the moment, particularly considering the limited chances of another rate cut anytime soon. Goldman Sachs still feels we will get a November rate cut but considering the strong recovery in the property market and risk of an asset price bubble, I feel the RBA will be happy to maintain a wait and see approach for a while. Today we have ANZ job ads and NAB business confidence due out at 11:30 AEST. Thursday is the big one; when we get jobs numbers. While these always offer a good indication of how the economy is performing, we don’t expect any major downside to negative releases on the local economic front. Moves in the local currency are likely to be more aligned to global macro-economic themes at the moment. China returns to trade today and will have to play catch-up to other equities, having missed out on the shutdown drama. Most importantly, iron ore will be trading again and this tends to cause some volatility for the AUD.
Euro flat but pound supported
EUR/USD has held a very tight range and is currently sidelined at 1.358 with a clear wait-and-see approach by traders. Later today we have German and French trade balance along with German factory orders due out. However we don’t expect any major moves from this data with traders on US politics headline watch. [currenciesGBPUSD] continued its recovery after bouncing off the uptrend support, which comes in at 1.60. Cable is back at 1.61 now and we expect to see it supported heading into the BoE. Mark Carney has been quite hawkish and this has prompted the bulls to push cable higher over the past few weeks.