Kiwi steady against US dollar

Key Movers

The Australian Dollar ground its way upwards in overnight trading, moving towards the key 0.72 level. It ultimately failed to launch however and was whittled lower to open this morning at 0.7180. Well supported by some recent optimistic news, the AUD nevertheless felt the effects of the US-China trade dispute as markets dialed back its trading activity.





Kicking things off at home, it was a mostly benign day on the economic calendar for Australia. The RBA is expected to release another round of the RBA’s Meeting Minutes which is widely expected to be neutral in tone. The RBA’s wait-and-see policy is firmly entrenched, and Traders are not expecting anything new.

The key focus for global markets at present is of course the US-China Trade dispute which has the potential to radically change global trade flows. The Wall Street Journal reported yesterday that Trump may look to dial back the Tariffs on $200bn worth of Chinese Imports to 10%, although the market remains skeptical. China is also expected to refuse Treasury Secretary Mnuchin’s invitation to reopen negotiation. It is within this context that the Aussie trades in a tight range as it waits to see how the situation develops over the next few days.



Moving into Tuesday, the Australian Dollar continues to keep a close eye on the US-China trade war while also looking forward to the RBA announcement today.


The Sterling has been one of the best performers of the day, rallying around 0.70% on Monday from 1.3067 to a high of 1.3164, a level not witnessed since the start of August. The main catalyst for the move was on the back of hopes that there was progress being made in the Irish border Brexit question. The Times newspaper reported yesterday that the EU was prepared to accept a frictionless Irish border post Brexit which increases the probability of a withdrawal agreement deal by the end of the year.




Meanwhile, on the data front, House prices rose by 0.7% in September, after falling by 2.3% in August, according to Rightmove. The annual pace of house price growth edged up to 1.2% in September, from 1.1% in August.



Looking ahead, The Prime Minister is set for another round of Brexit negotiations this week and the Pound has shown various occasions in the past couple of weeks that it remains highly sensitive to Brexit headlines. If concerns mount that the U.K. is heading towards a hard Brexit, we shouldn’t be surprised if sterling once against falls below $1.30 this week.


Markets have remained on edge after a report by Bloomberg indicated that President Trump wanted to proceed with tariffs on $200 billion more on Chinese goods but at a lower rate of 10% which could be announced as early as this week. Meanwhile The Wall Street Journal cited a senior Chinese official saying China wasn’t “going to negotiation with a gun pointed to its head.” Trump tweeted on Monday that of the success of tariffs as a negotiating tactic, while also threatening further levies if trade partners weren’t making “fair deals.” The US Dollar Index moved lower and was down 0.5% trading near the bottom of its recent range of 94-97 at 94.50.



On the data front, the New York Empire manufacturing index fell from a ten-month high of 25.6 in August to a five-month low of 19.0 in September. Some fall in the index was not surprising, given the toll the trade wars could be having on confidence. The index however, is volatile, and the sub-indices on activity remain elevated.



Looking ahead, the economic calendar is fairly light, however we will see more numbers coming on the housing market. The National Association of Home Builders releases its housing market index for September. Economists expect a reading of 66, down from 67 in August. The index has been strong of late, recently hitting 74, a level not seen since 1999.


The Firer traded slightly higher at the open this morning, moving to 1.1683 against the Greenback. The Pair traded as high as 1.1694 and has settled only slightly below that in what proved to be a mostly quiet afternoon.





The Greenback showed some broad weakness against all rivals, softening across the board which saw the Euro well supported on Monday. The key focus of global markets remains on the US-China trade war which continues to have a dampening effect on markets. The Wall Street Journal reported yesterday that Trump may look to dial back the Tariffs on $200bn worth of Chinese Imports to 10%, although the market remains skeptical. China is also expected to refuse Treasury Secretary Mnuchin’s invitation to reopen negotiation. The changing landscape has led to a lot of uncertainty in FX markets with the Euro among the currencies taking a wait-and-see approach to the proceedings this week.



On the domestic front, the EU annual inflation was confirmed at 2% while the core reading came in at 1% as expected. M/M headline inflation was 0.2%, a steady improvement on the previous -0.3%. Ultimately the numbers came in as widely expected and had little effect on the Euro.

Moving into Tuesday, Traders will keep a close eye on the US-China trade conflict as well as the ECB’s Mario Draghi’s speech for direction.


Monday saw the Canadian Dollar finish largely unchanged against the greenback as investors adopted a ‘wait and see’ approach ahead of potential trade news with Reuters also reporting that traders are structuring options contracts to bet on near term CAD volatility. The Loonie, which rose nearly 1% last week, traded in a tight range between 1.3002 and 1.3048 as softness in oil prices and deepening trade war rhetoric continue to weigh on the domestic unit.



Second tier hosing data released yesterday also showed resales of Canadian homes rose 0.9% in August realizing its fourth straight monthly rise but still below long run averages. As expected the release did little to move markets with traders already looking forward to Domestic inflation and retail sales which are due out on Friday.




Technical indicators now point to strong USD/CAD supports at 1.2976 with topside resistance now seen at 1.3027 followed by 1.3055.