Aussie falls due to strengthening Greenback despite neutral RBA

Key Movers

The New Zealand Dollar opened Tuesday’s session a shade above 66c against the U.S Dollar however unable to hold on to the 0.66 handle the Kiwi came under selling pressure as the European markets opened for their day of trade. The NZD/USD pair was sold off and touched a 2 ½ year low of 0.6540 on the back of what appears to be USD strength across the board, there was no real trigger for the move. Reading reports this morning is seems that U.S and Chinese trade relations are keeping investors on edge.


Meanwhile, overnight the GDT Dairy auction was slightly weaker than markets were expecting. GDT price index declined 0.7% following the 3.6% fall witnessed in the previous auction and put some additional selling pressure on the Kiwi.



Looking ahead we have ANZ Commodity Prices due out later this morning and further risks to the downside for the pair could be expected.


The Great British Pound was a lone rider Tuesday edging upward against the US dollar despite broad based and wide spread greenback gains. Sterling recouped recent losses following reports Bank of England Governor Mark Carney will extend his tenure beyond his current planned leaving date, renewing confidence in the BoE, proffering stability in a time of ongoing uncertainty.


Bouncing back through 1.2850 gains were capped by escalating concerns Theresa May will not be able to garner the parliamentary support at home for her plans to manage the divorce. While negotiators continue to work through key sticking points, namely an Irish border solution, there is a real fear that despite best efforts the October deadline will be missed and the UK will be forced to disband without a favourable plan in place.


Attentions now turn services data for any sign the UK economy is gathering pace, while Brexit developments steer broader direction.


The US dollar advanced against almost all major counterparts through trade on Tuesday as emerging market concerns and ongoing trade uncertainty weighed on markets appetite for risk. In what is becoming a familiar narrative the USD dollar found support in reports the conflict between the US and China could escalate further. As bilateral talks between the US and Canada break down there is a real concern the Trump administration will follow through and levy more tariffs on China and reneg on any compromises expected by Europe or Canada.




The escalation in trade hostilities only dampens demand for risk, amplifying the attractiveness of the USD as a haven asset. Couple this with heightened concerns regarding the stability across key emerging markets and a subsequent flight of capital and ongoing macroeconomic strength fueling support for tighter monetary policy and it is hard to look past the USD as both a short and medium asset play.


Attentions turn now to Services data ahead of Friday’s Non-Farm Payroll and Wage growth prints. A print in line with Tuesdays 14 year manufacturing activity high will likely add more fuel to the recent bull run, fostering further gains.


The Euro edged lower through trade on Tuesday caught up in the broader emerging market sell off and push toward the safe-haven US dollar. Slipping back below 1.16 the Euro touched intraday lows at 1.1531 before finding support and closing marginally higher.




Trade concerns weighed further on the 19 nation combined unit as investors fear the Trump administration is in no mood to compromise or negotiate on Trade with the China, Canada or Europe following the breakdown of talks between the US and Canada and a suggestion the US will impose tariffs on German automakers.


Attentions now turn to a raft of services data for macroeconomic guidance in the face of broader risk and geo-political flows.


Overnight the Canadian dollar weakened to a six-week low against its U.S. counterpart amid an uncertain outlook for Canada’s trading arrangement with the United States. The USD/CAD pair hit a 24-hour low of 1.3089 before later recovering. The greenback extended its gains against all of the major thanks in part to stronger than expected manufacturing activity.



On the data front today all eyes will be on the Bank of Canada's monetary policy announcement. While the Bank of Canada is expected to hold on interest rates, the bank may hold off this month due to the ongoing uncertainty of trade negotiations. The Bank of Canada raised rates at their last meeting in July.




From a technical perspective, the USD/CAD pair is currently trading at 1.3180. We continue to expect support to hold on moves approaching 1.3172 while now any upward push will likely meet resistance around 1.3200.