Compass Global Markets' Blog

7th February 2017 - Weekly Currency Market Report.

Posted by Thomas Su on February 7, 2017 at 10:36 AM

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The Market in Brief:

                                                  • AUD up against the majors except JPY.
                                                  • AUD record trade surplus surprises market
                                                  • BoE ups growth & lowers inflation forecasts
                                                  • BoJ denies intervention but doesn’t rule it out
                                                  • FOMC on track to hike
                                                  • US Unemployment ticks higher

Market Events Due:

                                              • NZ inflation expectations (Tue)
                                              • AUD RBA cash rate (Tue) RBA's Lowe speaks (Thur) Monetary Policy Statement (Fri)
                                              • NZ global dairy prices (Wed) 
                                              • RBNZ cash rate and Monetary Policy Statement (Thu) 
                                              • Chinese trade balance (Fri)
                                              • UK Manufacturing (Fri)


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AUD/USD: The local currency has continued to grind higher over the last week aided by upbeat equity markets, a US central bank on hold for now and the record trade surplus which caught the market completely by surprise. The week ahead will be eventful with the end of Chinese New Year celebrations bringing full volume back and as we have big data releases in retail sales, the first RBA meet of the year and Chinese trade numbers. AUD has now closed higher for 5 out of the last 6 weeks and is up over 7% since the Christmas lows. It is only 100 points shy of the November 8 high just before Trump was elected.

AUD/EUR: AUD closed the week up 1% to hit a fresh 19 month high as the whole European political and economic situation struggles. This offers a great opportunity for importers. There is no major EU data due until next week, so again the focus will be on local developments and could therefore mean fresh highs. Technically we are at the 50% retracement of the sell off from mid-2012 to late-2015 which suggest resistance at these levels.

AUD/GBP: The Bank of England’s surprise comments of a downgrade to the UK inflation forecast has this pair rallying to reclaim in two days what it took two weeks to lose in late January. UK Manufacturing numbers aren’t until Friday so it’ll mean the first part of the week will be dictated by AUD moves, although we can’t see the market wanting to take this too much more further. AUD closed the week up a solid 2.35% against the GBP so it's only 1.6% shy of its high 3 weeks ago. So importers or those buying GBP have a very good opportunity at these levels to cover a good portion of their exposure.

AUD/NZD: The AUD closed the week up 1% against the Kiwi but is mired in a 3 month 3 cent range as both economies chug healthily along. There does appear however to be no sign the RBNZ will hike interest rates come this Thursday as the FOMC does the work for them, and everybody else. At the moment it's back into the middle of the range so importers can target 100 points higher and exporters 100 points lower.

AUD/JPY: AUD closed the week down a tiny 0.25% against the JPY. Similar to AUDNZD, AUDJPY has been held in a relatively tight range of only 3.5% over the last 2.5 months. On the charts the range still favours importers given AUD is up 12% since November 8 when Trump was elected. Exporters can look to chip away on dips. 

AUD/CHF: AUD closed the week up a solid 1.2%. Once again the resistance that has held for almost 2 years managed to hold again. We have been confined to a reasonably tight range of 400 points since July 2016. If the EUR continues to weaken this will put more pressure on the CHF.  

Compass Global Markets Team.

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