Kiwi driven lower – Testing 66 US cents

Key Movers

Despite improvements in global risk sentiment and gains in key commodities, the Australian dollar remains under pressure after a mixed day of trading on Monday. The AUD had a quiet session, possibly a reflection of its dependence on Chinese markets which are closed for the remainder of the week. The Aussie opens at 0.7223 against the USD, 0.6238 against the Euro and 1.0916 against the NZD and fell 0.7% against the CAD.




Looking ahead to today’s session, traders will be closely w3atching the RBA’s October interest rate decision due out at 2:30pm AEST. With no chance of a movement in the cash rate, markets will be interested in the accompanying monetary policy statement with the bank’s view on economic growth, housing and labor markets not expected to surprise markets. Later in the week we will also see August trade balance numbers on Thursday and August retail sales on Friday with leading indicators suggestive of a soft read.



From a technical perspective, key levels of support are evident at 0.7200 and 0.7144 with resistance of the topside visible at 0.7255.


The Great British Pound enjoyed mixed fortunes to close Friday evening lower after a weekly high on Thursday of 1.3217 against the greenback. Final GDP figures for the quarter from April to June came in at expectations of 0.4%, driven by strong growth in the services sector.

UK Manufacturing PMI improved for the end of the third quarter beating expectations following a boost in the manufacturing sector and saw gains from 1.3040 to 1.3060.






Cable was driven higher overnight from 1.3000 to 1.3115 following gains seen against the EURO as the Italian government plans to run the country at a huge deficit of 2.4% of its GDP. Sterling also saw large gains against the EURO moving initially from 1.1220 to 1.1280 as European markets digested the information.


Furthermore Sterling was boosted on rumours that the UK was prepared to entertain the idea of backing down on initial plans to new check on goods between Britain and Northern Ireland to seal a Brexit deal.

On the agenda this evening is the release of UK Construction PMI and Nationwide housing prices as Cable opens this morning at 1.3040.


The US Dollar Index (DXY) opens marginally higher against a basket of currencies, opening this morning at 95.31. The catalyst for the move upwards was a last minute deal on the revised NAFTA agreement with Canada, solidifying the US-Mexico-Canada agreement.




The US-Mexico-Canada agreement (USMCA) buoyed the USD as optimism returned to the market. The Greenback was also supported by some comments by President Trump. The President initially was quick to claim vindication of his hard-line approach to trade negotiations but also added that India had reached out for a trade deal. Negotiations with the EU and Japan reiterate that Trump is attempting to settle trade differences with traditional trading partners in order to focus on China. The improved likelihood of a results with Japan and the EU, assisted the Greenback in its valuation.



In economic data, the US ISM index fell 59.8, slightly below expectations but still implying very good growth in the manufacturing industry. Brent crude oil moved around 2% upwards to hit its highest level since 2014, adding more to the inflation narrative in the US.

Moving into Tuesday, the US Dollar looks toward Federal Reserve’s Chairman Jerome Powell’s speech in Boston this evening.


The Euro came under further pressure against the U.S dollar on Monday and fell under the 1.1600 handle. Having initially opened during the Asian trade at 1.1617 the Euro was sold in the lead up to Eurozone PMI data, especially Italy’s, which dropped to 50.00 a 25-month low. Eurozone manufacturing shifted down another gear at the end of the third quarter.

The sector has seen booming growth at the start of the year to rapidly fade to the worst performance for two years in September as production and jobs growth have slowed in response to a stalling of export trade. The survey paints the worst trade picture for over five years, with export growth having slumped sharply from a series record high in late 2017 to near-stagnation in September.



Also from Eurozone, unemployment rate dropped to 8.1% in August, below expectation of 8.2%. The EUR/USD reached a low of 1.1564 in the early US session.

Looking ahead we see the release of Spanish unemployment and PPI.


The Canadian Dollar was among the best performers in overnight trading, hitting a 4-1/2 month high to reach 0.7822. Opening this morning at 0.7803, the Loonie was buoyed by reports that the US and Canada had finally penned the new NAFTA deal.






The revised NAFTA was agreed in a last-minute deal just before the deadline of midnight 30th of September. The agreement, to be renamed the US-Mexico-Canada Agreement (USMCA) is little changed from the existing NAFTA framework with the key differences being increased access to the Canadian Dairy supply for US farmers. Canada also ensured that the existing dispute resolution system was kept and that there would be no auto tariffs on existing production levels. Overall the USMCA’s main difference is that it removes a significant downside risk in the region.




The CAD was also helped along by increasing crude oil prices which grew around 2% to hit $84.4 per barrel. Concerns over supply in Iran and the Permian Basin seem to be the impetus for the movement upwards which helped demand for the currency of the oil-producing Canada.

Moving into Tuesday, the Loonie enjoys a quiet day on the economic calendar with only off-shore events to contend with.