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USD strength caps AUD

Published April 12, 2019

By Nicholas Cork

After testing 0.7175, AUD gave up its gains reasonably easily as commodity currencies came back under pressure when oil drifter lower from its 5-month highs, mainly due to a rise in crude inventories.  The USD then outperformed as better than expected headline data for producer prices was released, followed by another 49 years low in US jobless claims. The GBP barely blinked as an extension for Brexit to the end of October was granted, and the market has largely dismissed the Fed minutes where some policy makers said they “judge it appropriate to raise the target range for the federal funds rate modestly later this year,” however worth noting that other policymakers said that “the federal funds rate could shift in either direction.”  Whilst on Central Banks, the RBNZ Governor has said it’s not yet clear whether an interest-rate cut in NZ is warranted in May, also saying that “It is a really mixed picture, it’s just hard.” And with all this occurring along with US-CHINA and US-EU  trade spats,  FX Volatility has inexplicably fallen to a 5-year low.

AUD starts today’s session 50 points below its highs, back towards 0.7120, sitting nearly midway between its recent 70/72 range. The speculative market is still very short of AUD and may be active on the dips, however, a move below 71 cents would put AUD back into a more neutral mode. The AUDJPY that we have been mentioning has also topped out at 79.60 for the last few days, however, it is still sitting at 79.50 thus risk off is not really evident as 80.00 is still within reach.