AUD unable to hold on above 0.7200 amidst continued US-China Trade concerns

Key Movers

The NZD performed well amidst the risk-off backdrop upon the news that Theresa May unexpectedly postponed the parliamentary vote on her Brexit deal. Against the AUD, the Kiwi has reached an 18-month high at 0.9565. The biggest influence on the NZD at this time is still the US-China relations among uncertainty over the trade talks.



Business NZ will be releasing their performance of manufacturing index (PMI) on Friday. It is a monthly survey that provides an early indicator of levels of activity in the New Zealand manufacturing sector. A figure above last months of 53.5 will be a positive for the dollar.



The NZD opened at 0.6874 against the USD this morning.


The Great British Pound tumbled through trade on Monday, crashing through 20 month lows after Theresa May pulled a parliamentary vote to ratify her European withdrawal agreement. Amid increasing speculation, a catastrophic defeat could force the embattled PM from office, May aborted plans to put her exit strategy to parliament raising fresh concerns Britain’s political instability will derail an otherwise orderly common market exit. Sterling tumbled through 1.27, 1.26 and 1.2550 touching intraday lows at 1.2512 as uncertainty reigned supreme and sent investors scurrying for have plays.


The move leaves three scenarios on the table moving through the end of the year and the March 2019 deadline. If May cannot negotiate a last-minute deal with Brussels that will appease her detractors at home the UK will either be forced to suffer a humiliating and disorderly exit from Europe’s common economy or announce another referendum on EU membership.


WE expect Sterling will remain under pressure as the market continues to adjust expectations amid political instability and an ever-evolving Brexit platform. As we move closer to the March divorce deadline headlines that point to a no deal break could force a further 3%-4% depreciation as investors attempt to account for the broader economic costs and impact.


The Greenback strengthened against most major rivals overnight especially against the Pound Sterling which briefly fell to a 20-month low of 1.2507. The Pound Sterling tumbled to its weakest level since April 2017 after UK Prime Minister Theresa May pulled a parliamentary vote on her Brexit deal with the European Union, panicking investors about deepening political uncertainty in the United Kingdom.



On the data front yesterday in the United states we saw the release of US JOLTS Job Opening report which came in at 7.079M, surpassing expectations and the previous month figures. Looking ahead today and we will see the release of Producer Price Index (PPI) for the month of November. However, all eyes will continue to be on the Brexit turmoil.



Global equities and the U.S. dollar have been recently been put under pressure by expectations the Federal Reserve may be closer to the end of its three-year rate-hike cycle. Overnight however the Dow closed higher at 24,423.26 +34.31 (+0.14%) and S&P 500 at 2,637.57 +4.49 (+0.17%). The U.S dollar is also stronger this morning when valued against the Aussie dollar with the AUD/USD pair currently trading at 0.7189 -0.0026 (-0.36%).


The euro fell overnight from 1.1440 in late Sydney trading to 1.1355 as the sharp selloff in the GBP/USD dragged the Euro lower. The greenback was the biggest beneficiary of the move as the USD index moved 0.5% higher and forced the EURO 0.2% lower on the day. The downside moves came as British Prime Minister Theresa May cancelled the parliamentary vote on her Brexit plan which was scheduled for today, citing she was facing a significant loss. This moves the UK economy one step closer to a disorderly “no deal” Brexit.



Today we see ZEW surveys for December out of the Eurozone’s largest economy. The number, which will gauge investor sentiment in the German economy, is expected by market analysts to fall lower in line with deteriorating sentiment in both the domestic economy and the wider union.



We see key lines of technical support for the EUR/USD at 1.1315 and 1.1290 whilst topside moves are expected to meet resistance on approach to 1.1425 and 1.1460 respectively.


The USD/CAD remained under the 1.3330 handle for most past of the Asian and European session on Monday as the CAD was still enjoying the stellar employment numbers on Friday. This quickly turned around as the Greenback gained traction on the back of a positive run in US stock indices which have rebounded from a three-month low. The Loonie broke through the 1.34 psychological resistance and touched a high of 1.3416 overnight.



On the release front, Canadian construction numbers were mixed, Housing Starts climbed to 216,000 which was a five-month high and Building Permits declined 0.20% which was its weakest reading since June this year.

A dip in oil prices didn’t help the oil-correlated Canadian Dollar, crude oil slipped below $51 touching a low of $50.50.



The local calendar is light today with no scheduled data releases.