Compass Global Markets' Blog

9th August 2016 - Weekly Currency Market Report.

Posted by Thomas Su on August 9, 2016 at 9:41 AM

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The Market in Brief:

                  • AUD up against the majors with the exception of JPY.
                  • AUD Building Approvals down, Trade Balance blows out, RBA cuts rates but AUD rallies 2% after initial selloff. RBA rate cut in November currently 50/50. 
                  • GBP UK cuts interest rates as expected to 0.25%, the lowest in history and increases Asset Purchase Facility by GBP 60bn
                  • USD NFP 255k v expected 180k and USD rallies.
                  • CAD data disappoints and CAD weakens.

Market Events Due:

                • CNY Trade Balance (Mon) and Industrial Production (Fri)
                • GBP Manufacturing Production (Tue)
                • AUD RBA Governor Stevens speaks (Wed)
                • NZD Official Cash Rate, RBNZ Rate Statement, Press Conference and Gov Wheeler speaks (Thur) Retail Sales (Fri)
                • USD Unemployment claims (Thur) Retail Sales and PPI (Fri)


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AUDUSD: After disappointing data and a rate cut from the RBA the AUD managed to close the week 25 points higher. The RBA cut rates on Tuesday but after the initial drop AUD was 2% higher later that night. On Friday night US NFP printed 255k v expected 180k which saw the AUD come off its weekly high and fall 1%. That level of resistance has held for the last 6 weeks so importers can look to target that level if we get a rally back up there. The market has a 50/50 chance of another RBA cut in November while futures markets are now pricing in a 50% chance of a Fed rate hike by December.

AUDEUR: The AUD closed the week about 1% higher against the EUR. The solid levels of resistance have since November last year and AUD has now spent the last 4 weeks trying to break this level. However the dire situation in Europe has not changed and EUR rallies have been getting progressively lower since August last year.

AUDGBP: The AUD posted its second consecutive weekly gain against the GBP closing 1.5% higher. The Bank of England cut interest rates as expected to 0.25%, its lowest rate since the bank was established on 27th July 1694. They also increased the Asset Purchase Facility by 70bn GBP, from 375bn to 435bn a month. Governor Carney said they will do whatever it takes to stabilise the economy which sugggests they may cut rates to zero. This saw the GBP sold off solidly across the board.

AUDNZD: AUD finished the week up just over 1% after falling around 1.5% the week before. The short term support managed to stay intact. The RBNZ is expected to cut rates on Thursday by 0.25% to 2%. This is already priced in. The market is expecting another 2 cuts later in the year. There ia a chance the RBNZ may cut by 50 points on Thursday.

AUDJPY: The AUD closed the week down a tiny 6 points against the JPY after being down 100 points earlier in the week. The AUD continues to struggle against the JPY which was the strongest performing currency again last week.

AUDCHF: The AUD finished the week up around 100 points against the CHF. The big line in the sand that has held for 16 months has remained intact.

Compass Global Markets Team.

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