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AUD gives back some gains

Published November 12, 2018

by Nicholas Cork

The AUD starts the week hovering near 72 cents after coming under selling pressure again late Friday as the RBA Statement confirmed they are not looking to bring forward the timing for rate hikes. The slide continued in NY trading as equities and oil were sold, and the USD raced towards 18 month highs after US producer price index results exceeded nearly all expectations.

Consequently the Aussie cross rates offer a mixed bag to start the week with AUDJPY and AUDCHF lower on traditional ‘risk-off’ positioning, AUDEUR and AUDGBP still remain elevated, potentially on the Italian budget and Brexit risks, and AUDNZD is at 5 month lows as the NZD shrugs off the weak Dairy auction data and focusses instead on the exceptionally strong employment data.

Worth noting for our clients with trans-tasman exposures the volatility in AUDNZD over the last 5 months as it has moved from 1.0700 in June to 1.1150 in August, and today sits back near 1.0700 again after falling 150 points last week.  Also worth noting the view of the punters as Speculative FX Data released on the weekend showed a massive 25% reduction in total volume of short positions of NZDUSD in the previous week, compared to just a 4% reduction in AUD shorts.  (n.b. AUD total speculative volume is over twice that of NZD)  

The highlight for domestic data this week will be AU unemployment on Wednesday. Market moving headlines will continue over Italy, Brexit and Tariffs, and Oil should really be a bigger focus after falling 20% in the last month as the Saudis now talk cuts in production. Finally, it seems we will still need to wait for next week’s G20 to hopefully get some direction on US-CHINA trade.