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Global Market Update
The View from Australia

Craig Killaby May 14, 2019



> AU April NAB Business Confidence : 0 v. -1 revised prev.

> UK March Average Earnings Index & Claimant Count Change : 3.2% & 24.7K v. 3.4% & 24.2K exp.

> UK March Unemployment Rate : 3.8% v. 3.9% exp.

> EU May German ZEW Economic Sentiment : -2.1 v. 5.1 exp.

> US April Import Prices : 0.2% v. 0.7% exp.


Overnight Headlines (BBG)


>  Trump tries to enlist Fed in his trade fight against China, calls trade dispute a “little squabble”

>  U.K’s Theresa May plans to put Brexit law to U.K. Parliament in June


What you need to know


Relatively quiet session yesterday in FX markets, with most pairs staying largely unchanged as markets try to grasp the progress of the US/China trade deal. President Trump decided to urge the Federal Reserve to match what China would to offset the tariffs, essentially requesting QE to boost growth. It is unlikely that the Fed will do this, however the commonplace of the President’s critiques of the Fed is something to watch. Trump also stated that there is an ongoing dialogue with the Chinese on trade, sending a very slight calm into markets and helping equities retrace some of their losses from Tuesday evening. Offsetting the optimism was the renewed fears on bond markets that the Italian debt crisis may be coming back into the forefront. The Italian Deputy PM raised a few eyebrows after comments that they may be ready to break EU debt rules to boost employment, Italian 2y bond yields pushed to the highest levels since February and the EUR and GBP came under pressure. UST yields rose slightly across the curve with the 2s and 10s up near 1bp. US equity markets recouped gains, seeing the S&P500 able to push 0.8% higher to close. Mixed action on commodity markets, with WTI crude up on the spark of tensions with Iran and Gold down a touch as risk appetite improved.


The Day Ahead




> AU May Westpac Consumer Sentiment : 1.9% prev.

> AU Q1 Wage Price Index : 0.6% exp.

> CN April Fixed Asset Investment & Industrial Production : 6.4% & 6.5% exp.

> CN April Retail Sales & Unemployment Rate : 8.6% exp & 5.2% prev.

> CA April CPI : 0.4% exp.

> US April Core Retail Sales & Retail Sales : 0.7% & 0.2% exp.

> US FOMC Member Quarles to speak


We will get another round of important data today, with the highlight to come this morning in APAC with the release of AU Q1 wage price index at 11:30am.The impact of this figure will likely be seen on the probability of the RBA’s cut next month ahead of tomorrows very important employment report. If there is no wage pickup in the March quarter, then the impact on inflation is likely to be limited and increase the downside inflation risks. We will also have a large data dump from China, with any data being closely monitored due to the trade situation. Overnight in the US, headline risks on trade the main underlying theme while headline and core Retail Sales will also hit the wires. Risks pointing to the downside for the AUD, with session direction to come from 11:30am’s data.


Range for the day : 0.6920 – 0.6970


AUD/USD Technicals


Not looking good on the technical front, with the AUD breaching yesterday’s 1st support and the 61.8% fibo and eyeing the 0.6905 on this recent run lower. Absolutely no change to the topside, as that has not been a factor as late, although the SMAs keeping the upside in check continue to drift lower. 200SMA sits at 0.7153 with the 100 at 0.7104 and 55 at 0.7076.


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