Kiwi tests resistance as trade tensions ease

Key Movers

The Australian Dollar has found some upside when valued against its US counterpart over the past 24 hours, trading as high as 0.7464 just at the end of the New York session. However, it wasn’t all good news intraday with the release of Australian CPI figures, headline inflation remained flat at 0.4% q/q which was below expectations and headline inflation moved just into the RBA’s target range of 2-3% at 2.1% y/y. The trimmed mean which is the RBA’s preferred measure edged down 0.5% q/q while was on a y/y basis at 1.9% y/y – still just under the target band hence why we initially saw a high of 0.7448 just after 11.30 AEST and then a quick pull back thereafter. Traders continued to sell the Aussie and as we closed the Asian session and we were back under 74c again. Market pricing is implying that the cash rate will remain unchanged for a considerable period of time, with a less than 50% chance of a hike in the next 12 months.



The local unit buoyed by risk appetite in the markets after Trump and EU Junker struck a deal to increase trade, reduce tariffs and costs, and increase U.S. farm and natural gas exports to Europe in order to avert an all-out trade war between the two.



Looking ahead, we have the release of Import Prices by the Australian Bureau of Statistics which measures the change in the price of goods purchased by importers. The data contributes to inflation for both businesses and consumers. We are expecting to see an increase on 1.9% on the previous 2.1% while the Export Price Index is expected at 3.9% (previous 4.9%). The data is unlikely to drive much action, upport sitting at 0.7400 and resistance up at 0.7490.


The Great British Pound is slightly stronger again this morning when valued against its US counterpart reaching a 24-hour high of 1.3200 on the back of strong local data and overall US dollar weakness.



On the data front yesterday the CBI (Confederation of British Industry) Realized Sales survey dropped 20 points, but still beat the estimate 16 points. Retail sales growth remained strong in July but well below the previous month 32 points. There are no macroeconomic releases scheduled on Thursday.



From a technical perspective, the GBP/USD pair is currently trading at 1.3190. We continue to expect support to hold on moves approaching 1.3040 while now any upward push will likely meet resistance around 1.3200.


The United States Dollar is weaker across the board over the past 24 hours with the US Dollar Index falling 0.4% against a basket of currencies. The big headline came out of Europe this time with conciliatory comments from President Trump after his press conference with EU President Juncker. In China, the media continues to report on further, targeted measures by the PBOC on capital requirements for banks. Ultimately, the improved global conditions saw capital return to risky assets and the Greenbacks counterparties marginally rise against the Dollar.



Ahead of their much-anticipated meeting on trade, President Trump held a joint press conference with President Juncker saying “we expect something very positive” to come of the meeting. Despite the lack of real information, the market reacted positively to the initial press conference on the hope of reconciliation. The Euro in-particular accelerated northward with the Great British Pound also finding its feet to near weekly highs. Nevertheless, auto tariffs remain a point of contention with reports of both sides considering tariff options. In Asia, the other target of US trade aggression China, looks to further ease policy measures to encourage growth with the latest announcement from the PBOC. The PBOC was reported to have eased counter-cyclical capital requirements for banks in an attempt to boost lending. The positive moves by China to encourage growth had a significant impact on commodity currencies with the Aussie in-particular pushing two-week highs.



In the day ahead, market focus will continue to likely be on the Trump-Juncker trade discussions.


EURUSD spiked 0.40% to 1.1735 amid the recent agreement reached by the US and the European Union. Trump announced that the EU will be expanding lng (gas) and soybean imports from the US and both countries will be reducing industrial tariffs.

The EURUSD broke and stayed above the 1.1720 resistance level, a bullish short-term signal. Markets will be closely watching Tonight’s ECB rate decision and tomorrow’s US 2Q GDP release for further hints on where to go from here.

The Q&A session following the ECB decision is generally a volatile event so keep an eye on price action around 1.1680 and 1.1780.


The loonie had the best performance among other major currencies versus the dollar, strengthening 0.90% as USDCAD dropped to 1.3041.

Continued oil WTI strength and optimistic headlines around the NAFTA agreement brought further support for the CAD and spot was able to break through the 1.3110 support with ease.
It now seems like we have entered into a new range between 1.30 and 1.31 which will probably be tested as the ECB meeting resumes and the market gets a sneak peak of the US economy with 2Q GDP.