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Global Market Update
The View from Australia

Craig Killaby February 7, 2019



> NZ Q4 Employment Change & Unemployment Rate : 0.1% & 4.3% v. 0.3% & 4.1% exp.

> AU Q4 Business Confidence : 1 v. 3 prev.

> UK BOE Official Bank Rate & Monetary Policy Summary : 0.75% v. 0.75% exp.


Overnight Headlines (BBG)


>  David Malpass, Trump’s pick to lead the World Bank, said the lender should follow through on a commitment to lend less to China

>  The top Democrat and Republican working on a border-security deal said they’re nearing an accord but that negotiations may go into the weekend, with a week left to pass a spending bill to avert another government shutdown


What you need to know


Uninspiring trading session during APAC yesterday, as the AUD came under some slight selling pressure following the quarterly business confidence figures and CNH selling. The poor NZ employment numbers for Q4 started the session off on a negative note for the region. Continuing the theme, the NAB aggregated survey saw that business confidence dropped in the quarter from 3 to 1 as the run of poor data continues in Australia. To wind up the AU session, NAB called a trading halt as the CEO and Chairman have stepped down in light of the findings of Monday’s Royal Commission report. In Europe, it was the UK’s central bank that had the eyes of markets as they kept interest rates on hold as expected. Fairly whippy moves for the GBP, following a warning that the economy is heading for its worst year since the GFC in light of Brexit uncertainty while downgrading nearly all forecasts. GBPUSD was down 0.2% immediately following the decision, however it surged after outgoing BOE Gov. Carney commented that rate hikes are on still a possibility to finish 0.2% higher against the Buck.


In the US, it was a quiet session in terms of data with nothing really to trade off of. Larry Kudlow did little to ease nerves on the state of the US/China trade war, commenting that there is still a ways to go until the sides come to an agreement. Essentially, we can take a deal off the table until Trump and Xi meet at the end of the month in Vietnam leaving the AUD vulnerable to a further risk-off move. It was a Dollar friendly session yet again as CNH continues to be sold off with China on holidays until next week. It will be interesting to see what happens to the Aussie when the market  gets that volume back after what was a very busy Golden Week outside of China. US stocks took a hit, with the S&P500 down near 1% on the Kudlow comments on trade. UST yields sliding across the curve, with the 2s and 10s down 4.3bp. It was WTI crude that stole the show in commodity markets, down over 2.5% and putting pressure on commodity based pairs. Gold up a touch, 0.3%.


The Day Ahead




> AU RBA Statement on Monetary Policy

> US FOMC Member Bullard Speaks

> CA January Employment Change & Unemployment Rate : 6.5K & 5.7% exp.


Range for the day : 0.7070 – 0.7150


In what was a game changing week for traders in APAC, we will get a nice finale with the RBA’s SOMP at 11:30am this morning. We have already gotten some insight into what is going to come in this report from Lowe and their statement Tuesday, just how ‘balanced’ the policy stance is what everyone in AU will be looking at in the statement. Direction for the AUD will come after this is released, with the risks pointing to the downside in light of Lowe’s neutral shift on Wednesday. Not a whole lot going on in Europe/US overnight, and not expecting any trade news.


AUD/USD Technicals


After breaking through the psych level of 0.7100 level quite easily yesterday, next up will be 0.7076 for bears looking to really bash the AUD lower. If the AUD finishes the week below that level, we can expect to see some bearish momentum build even further in the medium term and a significant drop lower to 0.7021. The bias has turned bearish as the 55DMA edges closer to crossing the 100. Resistance levels unchanged, with 0.7170 (100/55DMA) and the 200 DMA at 0.7285.


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