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Andro Matugas-Barnes
Dec 12 2018

TAT FX Brief: Dec18

News & Insights
TAT FX Brief: Dec18
<blockquote> <p>The Australian Dollar maintained a tight trading range throughout Tuesday bouncing between 0.7185 and 0.7225, closing marginally higher on the day.&nbsp;</p> </blockquote> <p>US and China have engaged in high-level, constructive&nbsp;dialogue on trade, and confirmation that China will cut tariffs on US auto imports has bolstered investors demand&nbsp;for risk, adding&nbsp;a backstop behind the AUD&rsquo;s recent slide.&nbsp;</p> <ul> <li>Having struggled to push back through 0.72 for much of the Australasian session, positive trade talks helped&nbsp;the AUD drive toward intraday highs at 0.7224.</li> <li>Upside moves were however checked, as investors refrain from&nbsp;extending upside expectations on headline news alone.</li> <li>Markets are conscious and wary of moving to early on&nbsp;upbeat trade headlines, preferring to sit back and await a clear cut signal; an end to the trade dispute is&nbsp;forthcoming.</li> </ul> <p>While seemingly well supported on moves approaching 0.7175/ 0.7150, we expect the AUD will continue to&nbsp;bounce amid a wider 0.7150 &ndash; 0.7280/0.73 range through the short term. Attentions turn to Westpac&nbsp;Consumer&nbsp;Sentiment&nbsp;as a marker for domestic economic performance, while global geo-political risks continue&nbsp;to weigh on risk appetite and cap short term AUD gains.</p> <ul> <li>AUD/USD</li> </ul> <p>Keep in mind that this pair is highly sensitive to the US/Chinese trade situation, which has seemed to get&nbsp;worse. As long as that&rsquo;s going to be the case, the Australian dollar will suffer, as it is so highly levered to the&nbsp;Chinese economy. At this point, we could very well find ourselves reaching towards the 0.70 level underneath,&nbsp;but I don&rsquo;t think it&rsquo;s going to be easy to hang onto a trade for any real length of time regardless.</p> <p>Headlines&nbsp;coming out of Asia or Washington DC can move this pair suddenly, with the irony being that headlines out of&nbsp;Australia will have very little to do with where this currency goes in the meantime. It&rsquo;s not until we get a&nbsp;resolution to that situation that the Australian dollar can be trusted for larger moves. With that being said, I&nbsp;believe in fading rallies, but I&rsquo;m not hanging onto large positions.</p> <ul> <li>AUD/EUR</li> </ul> <p>Overnight the Euro hit a high of 1.1399 against the U.S. dollar, just missing the 1.1400 level, but fell to a low of&nbsp;1.1306 shortly after, as political turmoil in Europe alongside a fading momentum in Wall Street, benefited&nbsp;the greenback in the American afternoon.</p> <p>On the release front today in the EU, we will see the release of Industrial Production for the month of October.&nbsp;However, all eyes will continue to be on the Brexit turmoil.&nbsp;</p> <p>From a technical perspective, the&nbsp;EUR/USD&nbsp;pair is currently trading at 1.1317. We continue to expect support&nbsp;to hold on moves approaching 1.1295, while now any upward push will likely meet resistance around 1.1345.</p> <ul> <li>AUD/GBP</li> </ul> <p>The Great British Pound suffered deeper losses through trade on Tuesday; Theresa May&rsquo;s tenuous&nbsp;hold of office may finally break. Having bounced off one and a half year lows to push back, a stronger dollar&nbsp;and suggestions MP&rsquo;s pushing for a vote of no-confidence may finally have the numbers sent the embattled&nbsp;unit lower. The heightened political instability has bolstered expectations: the UK will be forced to leave the&nbsp;common market without a firm deal in place, raising questions as to the impact on UK economic growth and&nbsp;longer-term Sterling strength.&nbsp;</p> <p>GBP fortunes remain pinned to ongoing Brexit and political developments, making it almost impossible to&nbsp;suggest this is the bottom for the GBP. Having fallen through the last 4 weeks consecutively, Sterling&rsquo;s fates&nbsp;hangs on whether May can enact a last-minute renegotiation with Brussels.</p> <blockquote> <p>Early signs suggest EU spokesmen&nbsp;and women are unwilling to yield, forcing the current Withdrawal Agreement to a Parliamentary vote (before&nbsp;Jan 21).</p> </blockquote> <p>As one week volatility moves nearer its highest level in the last 12 months, ranges are becoming increasingly&nbsp;harder to&nbsp;forecast&nbsp;and we expect the GBP will continue to whipsaw in response to headline news events.</p> <ul> <li>AUD/CNY</li> </ul> <p>China kick-started this week releasing trade balance and inflation data, and will end it with retail sales and&nbsp;industrial production figures, more likely to affect the AUD/USD pair, than any local figure.</p> <ul> <li>AUD/INR</li> </ul> <p>The RBI unveiled plans to establish a committee to examine its reserve management, as well as look into&nbsp;offering more support for struggling banks.&nbsp;Priyanka Kishore, head of India and Southeast Asia economics at Oxford Economics, said: &quot;Patel&#39;s resignation&nbsp;seems like a protest to the government&#39;s interference.</p> <blockquote> <p>&quot;There are already other concerns weighing on the economy... uncertainty about RBI&#39;s leadership and policy at&nbsp;this point could weigh on growth further.&quot;</p> </blockquote> <p>Meanwhile, India&rsquo;s ruling Bharatiya Janata Party was also trailing in vote count in three big heartland states, in&nbsp;a setback for Prime Minister Modi.&nbsp;In another loss for the Modi government, economist Surjit Bhalla stepped down from his role on the economic&nbsp;advisory council less than 24 hours after the departure of Mr Patel.</p> <p>In its forecast last week, Fitch Ratings pointed to a weakening rupee.</p> <blockquote> <p>Fitch said: &ldquo;The widening of the current account deficit amidst tighter global financing conditions should put&nbsp;downward pressure on the currency, and we forecast the INR to weaken to 75 against the dollar by end-2019.&rdquo;</p> </blockquote> <p><strong>Major events/data this month:</strong></p> <p><strong>&rArr;&nbsp;</strong><strong>Wednesday, December 12, 2018</strong></p> <p>13:30 USD Consumer Price Index (YoY) (NOV)&nbsp;<br /> 13:30 USD Consumer Price Index Ex Food and Energy (YoY)</p> <p dir="ltr"><strong>&rArr;&nbsp;</strong><strong>Thursday, December 13, 2018</strong></p> <p>Summit of EU Leaders&nbsp;</p> <p>12:45 EUR European Central Bank Rate Decision (DEC 13)&nbsp;<br /> 12:45 EUR ECB Marginal Lending Facility (DEC 13)&nbsp;<br /> 12:45 EUR ECB Deposit Facility Rate (DEC 13)&nbsp;<br /> &nbsp;</p> <p><strong>&rArr;&nbsp;</strong><strong>Friday, December 14, 2018</strong></p> <p>Summit of EU Leaders&nbsp;</p> <p>13:30 USD Retail Sales Advance (MoM) (NOV)&nbsp;</p> <p><strong>&rArr;&nbsp;</strong><strong>Saturday, December 15, 2018</strong></p> <p>10:30 EUR ECB&#39;s Draghi Speaks in Pisa, Italy&nbsp;</p> <p><strong>&rArr;&nbsp;</strong><strong>Wednesday, December 19, 2018</strong></p> <p>09:30 GBP Consumer Price Index (YoY) (NOV)&nbsp;<br /> 09:30 GBP Core Consumer Price Index (YoY) (NOV)&nbsp;<br /> 19:00 USD FOMC Rate Decision (Upper Bound) (DEC 19)&nbsp;<br /> 19:00 USD FOMC Rate Decision (Lower Bound) (DEC 19)<br /> 19:00 USD Interest Rate on Excess Reserves (DEC 20)&nbsp;<br /> 19:30 USD Feds Powell Holds Press Conference Following FOMC Decision&nbsp;<br /> &nbsp;</p> <p><strong>&rArr;&nbsp;</strong><strong>Thursday, December 20, 2018</strong></p> <p>00:30 AUD Unemployment Rate (NOV)&nbsp;<br /> 00:30 AUD Employment Change (NOV)&nbsp;<br /> 12:00 GBP Bank of England Bank Rate (DEC 20)&nbsp;<br /> 12:00 GBP BOE Asset Purchase Target (DEC)&nbsp;<br /> &nbsp;</p> <p><strong>&rArr;&nbsp;Friday, December 21, 2018</strong></p> <p>13:30 USD Gross Domestic Product Annualized (QoQ) (3Q T)&nbsp;<br /> 13:30 USD Durable Goods Orders (NOV P)&nbsp;<br /> 15:00 USD Personal Consumption Expenditure Core (YoY) (NOV)</p> <p><span style="font-size:8px">Source:&nbsp;Economic Calendar -&nbsp;<a href="" target="_blank"></a></span></p> <p><strong>Useful links:</strong></p> <p><a href="" target="_blank">Setup FX Account</a>&nbsp;|&nbsp;<a href="" target="_blank">FX Login</a></p> <p><a href="" target="_blank">How to choose an FX broker for your business</a></p>

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