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Global Market Update
The View from Australia

Craig Killaby July 10, 2019



> AU July Westpac Consumer Sentiment : -4.1% v. -0.6% prev.

> CN June CPI & PPI : 2.7% & 0.0% v. 2.7% & 0.3% exp.

> UK May GDP : 0.3% v. 0.3% exp.

> UK May Manufacturing Production : 1.4% v. 2.2% exp.

> CA BOC Monetary Policy Rate Decision & Statement : 1.75% v. 1.75% exp. (no change)

> US EIA Crude Oil Inventories : -9.5M v. -1.9M exp.


Overnight Headlines (BBG)


>  Minutes of Fed’s June meeting show that many officials saw a stronger case for a rate cut last month

>  BOC’s Poloz puts Canada’s rates firmly on hold amid global trade risks


What you need to know


The Aussie was able to retrace nearly all of its losses over the last 48 hours as the Fed all but locked in a cut for the end of July while their June minutes signalling to markets their willingness to move on rates in an aggressive fashion if need be. Looking back on yesterday’s Asian session, the AUSUSD was rangebound as the market awaited the all important Fed minutes and Powell’s testimony. The data was both negative in Asia, with consumer sentiment continuing to slide and Chinese producer inflation missing the mark it looked to have set the stage for an AUD drop on Powell’s speech. This was not the case, as Powell reiterated the openness of the Fed to move rates while FOMC member Harker also mentioned that a 0.25% cut would likely have little effect. Trade headwinds remain the major concern for the Fed and Central banks around the globe as the lack of inflation and growth becomes a real problem for monetary policymakers to contend with. Poloz and the Bank of Canada kept their rates on hold as expected, while signalling that we shouldn’t be expecting a move anytime soon. Price action in FX was USD weakness, with the AUD and NZD the best performers against a sliding Dollar. US equity markets performed very well with both the S&P500 and the DOW closing up on the day. In commodities, it was a good session across the board with the exception of Natural gas as Iron ore was up 2.6% and Oil jumped 3.4% on the surprise contraction of US oil stocks in the EIA report.


The Day Ahead




> AU June MI Inflation Expectations : 3.3% prev.

> AU May Home Loans : -0.6% exp.

> UK BOE Financial Stability Report

> EU ECB Monetary Policy Meeting minutes

> US June CPI & Core CPI : 0.0% & 0.2% exp.

> AU RBA Ast. Gov Debelle to speak

> US Fed Chair Powell to testify (Day 2)

> US FOMC Member Quarles to speak


Looking ahead to today’s session, we are likely to be rangebound yet again for the AUDUSD with tier two data by way of inflation expectations and Home Loans for May the only real data on the docket. Overnight the ECB meeting minutes and BOE report are on the cards, however don’t expect too much movement from there as markets eagerly await Powell’s day 2 testimony and the US June Consumer inflation numbers. The trade that saw the USD strengthen over the past 48 hours is starting to unwind as the market realises the Fed’s willingness to cut rates. Expecting a test of the 0.7000 handle on the US CPI miss and some more dovishness from the Fed chair this evening.


Range for the day : 0.6950 – 0.6995


AUD/USD Technicals


The 55SMA is where the AUD seems to be comfortable sitting in this environment, trading in a range on either side of the 0.6957 level. Based on the USD weakness seen last night, a bullish follow-through to test 0.7024 (100SMA) may be on the cards if we see a break of the 0.6994 July 8th high. The 0.6911 level will be the support level we are watching as the overnight low. With 0.6909 and the late may lows of 0.6865 next up.


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