Kiwi edged lower as escalating US-China tensions sap risk appetite

Key Movers

The Australian dollar’s multi-day decline extended overnight due to dovish comments from RBA deputy governor Debelle coupled with softness in commodity and European equity markets. With markets adopting a risk-off modd, the Aussie dipped below the key 0.72 handle, touching intraday lows of 0.7192 before being bid back up to 0.7225. Continuing its recent trend the AUD/NZD cross also fell to 1.0476, representing it’s lowest level since July 2017.



Recapping yesterday’s retail sales numbers, retailers reported a 0.3% increase in sales for the month of October which was largely in line with market expectations. Whilst sales growth is still not strong by historical standards, analysts were quick to point out the numbers are looking much stronger than they did in the mid-year read. Last night also saw RBA deputy governor deliver a speech in which he stated there is still scope for reductions in the cash rate if economic conditions demanded it and also suggested the bank could deploy QE if a future crisis presented itself. He did reiterate that the next move in the cash rate would likely be up but highlighted tightening credit standards as an area of concern.


Domestic releases are done for the week as the Aussie will now look to Non-Farm payrolls due out of the world’s largest economy tonight. Markets are expecting a rise of 198K after last months blockbuster beat and will also be paying close attention to consumer sentiment data and some Fedspeak on financial stability from board member Brainard.




On the technical front we see minor support for the AUD/USD around the 0.7190 region however expect any moves through this level to test the 0.7130 handle. On the topside, 0.7280 has now become the first line of resistance heading into today’s session.


The Great British Pound fell through trade on Friday, marking a fourth consecutive weekly loss as investors pair positions, pulling back ahead of critical parliamentary Brexit vote. The short-term fate of the Pound hangs on whether or not Teresa May can wrangle a majority vote for her Brexit Deal tomorrow. Early polling suggests the odds are heavily stacked against the incumbent and embattled PM as a deeply divided parliament appears set on rejecting the deal in its current format.


Sterling was down 0.2% Friday touching 1.2750, nearing 18-month lows touched Wednesday as the likely hood of a no-deal Brexit increases. A defeat for May on Tuesday opens the door to a series of varying outcomes that will change the shape of Britain’s exit from the common market with the possibility of a 2nd referendum on membership now on the table. At time of writing most analyst expect some form of exit deal will be negotiated before the end of the year, allowing the GBP to bounce back toward 1.29/1.30 and rally beyond 1.34-1.35 moving into the middle of 2019.


Attentions remain squarely affixed to Tuesday votes as the primary driver of Sterling Direction.


On Friday the U.S. dollar fell against the majority of its rival counterparts on the back of an unimpressive monthly employment report which showed U.S. employers hired fewer workers than forecast in November, 155K, although the unemployment rate remained steady at 3.7% (at near a 49-year low). The result raising concerns that U.S. growth is moderating and the Federal Reserve may stop raising rates sooner than previously thought.



Looking ahead this week and there are no scheduled releases for Monday. On Tuesday we will see the release of Producer Price Index (PPI) for the month of November. On Wednesday we will see the release of Consumer Price Index (CPI) for the month of November. Finally on Friday all eyes will be on the release of core Retail Sales, Industrial Production, and Purchasing Managers' Index (PMI) all for the month of November.



The Greenback today is weaker when valued against the Canadian dollar on the back of higher oil prices and data showing a record increase in domestic jobs bolstered expectations for further interest rate hikes from the Bank of Canada. The CAD/USD is currently trading at 0.7500. The Euro closed the week slightly below the 1.1400 level. Currently trading at EUR/USD 1.1382. Only the Pound Sterling closed the week softer against the Greenback, down 0.2%, as British Prime Minister Theresa May pressed ahead with plans for a parliamentary vote on her Brexit deal despite warnings it could topple her government. The GBP/USD is currently trading at 1.2707.


Friday’s US session saw the Euro rise against the greenback as US employment data showed U.S businesses hired fewer workers in November than markets expected. This saw EUR/USD bounce off lows of 1.1360 to touch intraday highs of 1.1420 before retreating slightly into Monday mornings open where it is currently trading at 1.1390 heading into the week.



With a number of risk events due out of Europe this week, the Euro could be in for some volatile trading. First off the rank on Monday is German trade balance data; markets are expecting a 0.5% rise in exports and a 0.4% rise in imports with analysts pointing to the sharp fall in oil prices as a possible driver of an increased surplus. Following this we have Zew survey results out of Germany and the eurozone before we see Eurozone industrial production numbers on Wednesday which are forecasted to show a 0.3% rise when compared with September.

The key risk event for the Euro is no doubt the European Central Bank policy meeting on Thursday at 12:45 GMT. Markets are expecting the central bank to continue it’s plans in reducing stimulus and announce an end to quantitative easing at the meeting. This is despite the growth rate falling to the lower band of the banks 2018 forecasts. We then have Eurozone PMI numbers out on Friday which will be watched closely as an indicator of activity in the important manufacturing and services sectors.



We see immediate technical resistance at the 1.1400 handle before 1.1421. On the downside we see first lines of support at 1.1321 and 1.1300.


Friday’s US session saw the Euro rise against the greenback as US employment data showed U.S businesses hired fewer workers in November than markets expected. This saw EUR/USD bounce off lows of 1.1360 to touch intraday highs of 1.1420 before retreating slightly into Monday mornings open where it is currently trading at 1.1390 heading into the week.



With a number of risk events due out of Europe this week, the Euro could be in for some volatile trading. First off the rank on Monday is German trade balance data; markets are expecting a 0.5% rise in exports and a 0.4% rise in imports with analysts pointing to the sharp fall in oil prices as a possible driver of an increased surplus. Following this we have Zew survey results out of Germany and the eurozone before we see Eurozone industrial production numbers on Wednesday which are forecasted to show a 0.3% rise when compared with September.

The key risk event for the Euro is no doubt the European Central Bank policy meeting on Thursday at 12:45 GMT. Markets are expecting the central bank to continue it’s plans in reducing stimulus and announce an end to quantitative easing at the meeting. This is despite the growth rate falling to the lower band of the banks 2018 forecasts. We then have Eurozone PMI numbers out on Friday which will be watched closely as an indicator of activity in the important manufacturing and services sectors.



We see immediate technical resistance at the 1.1400 handle before 1.1421. On the downside we see first lines of support at 1.1321 and 1.1300.