The USD is trading softer against its G10 counterparts

Key Movers

The CAD is trading higher against the USD this morning on broader USD weakness. US/China trade policy along with NAFTA continues to elevate market risk for the Loonie. Domestic risk this week will be Tuesday’s manufacturing sales data and Friday’s retail sales & CPI data release.


The ECB recently reaffirmed their plans to reduce its asset purchase programme to €15 billion per month in the last quarter of the year, finalising the unprecedented programme by the end of the year. There was good news out of Italy this morning as a report apparently from Italian Finance minister Giovanni Tria that the budget deficit from the upcoming budget will be around 1.6%, below the ECB’s ceiling of 2%. This has seen a mini rally in Italian bonds and it may seem that for the time being at least the risks out of Italy are off the table.

In terms of economic fundamentals, Eurozone CPI on headline and core released as expected at 1.0% and 2.0% respectively. Wednesday marks the start of meetings amongst EU leaders and Brexit is set to be one of the topics of conversation with Michel Barnier expected to be granted more flexibility.


The party conference season has kicked off with the Liberal Democrats and Vince Cable getting things rolling. This is the first conference of many with both the Tory Party and Labour Party expected to create headlines and fireworks. Normally conference season passes without too much attention, however with the Conservative government having a minority within Parliament and Brexit plans being examined constantly this season could cause some volatility for the pound. Not wishing to miss out on all this upcoming drama, London Mayor Sadiq Khan called for a second referendum over the weekend on the outcome of the Brexit deal. Expect more of this over the coming weeks as well Boris Johnson’s possible leadership bid.



In the meantime UK inflation is released this week which could cement the Bank of England’s position on interest rate hikes. For a next hike in 2019 inflation will have to consolidate around the 2% mark, the Bank of England’s target, if wage growth is still subdued.


The Australian Dollar found its feet on Friday, forcing its way above 0.72. The Pair built on the momentum from Thursday to recover from a 30-month low but petered out towards the 0.7230 level. Sentiment ultimately shifted however after US President Trump put the brakes on market optimism, stating that he was indeed willing to put into effect another round of Tariffs despite Secretary Mnuchins’ re-opening of trade talks. Opening this morning at 0.7151, the Aussie continues to feel the effect of the US-China trade tensions.

Exacerbating the trade tensions was several media reports that Trump intended to proceed with $200bn tariffs on Chinese imports. Trump mentioned he was unconcerned with the re-opening of discussions and would indeed press ahead with the tariffs. Over the weekend, the Wall Street Journal also mentioned that Trump may lower the tariff to 10% from the originally proposed 25%, a potentially “better” outcome than expected for the Aussie.

Amidst the trade war discussions was a strengthening Greenback with mostly positive data releases for the week. Chicago Fed President Evans, noted that the US economy was “firing all cylinders” and said it would be “quite normal and consistent” should the Fed take its cash rate above neutral over the medium term. In Australia, things appeared to be quite rosy as well, with 44,000 jobs added to the economy, as reported on Thursday. The initial jump led to movement around the 0.72 level but the good news story was gradually unwound as Chinese data came in a mixed bag. Chinese retail sales remain strong but fixed asset investment continued to decline, undermining the Aussie’s gains.

To start the week the Australian Dollar maintains its focus on the on-going trade war. Domestically, the AUD looks to the RBA’s monetary policy minutes for direction.


The New Zealand Dollar is weaker against the U.S. Dollar on the back of upbeat US Data, U.S. domestic retail sales rose 0.1 percent in August, and amid Trade War concerns. Locally on Friday we saw the release of Business NZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for August was 52.0. While this was 0.8 points higher than July, it remains below the long run average expansion level of 53.4.

On the data front and the macroeconomic calendar is pretty quiet for the first half of this week. On Wednesday we will see the release of Global Dairy Trade (GDT) which is a leading indicator of the nation's trade balance. Also, on Wednesday we will see the release of Westpac Consumer Sentiment a survey of about 1,500 consumers which asks respondents to rate the relative level of past and future economic conditions. Looking further ahead in the week we will see on Thursday the release of quarterly Gross Domestic Product and Visitor Arrivals will be released on Friday.

From a technical perspective, the NZD/USD pair is currently trading at 0.6548. We continue to expect support to hold on moves approaching 0.6501 while now any upward push will likely meet resistance around 0.6642.