US$ weakness sees further advance but a different story in Europe

January 14, 2018

Finport Currency Brief - Courtesy of Compass Global Markets.

 

Good morning,

AUDUSD: Friday’s early session pull back was soon bought into and resulted in a pop through 0.79c for the first time since late Q3’17. We appear set for my forecast 80c in due course and I don’t see any real headwind until 0.8150. An indication of the force of this upward trajectory, (or more correctly the US$ sell off), can be seen in Friday night’s price action where instead of the usual contraction back towards the middle of the sessions range – especially ahead of a long US weekend - the pair closed the New York day out at the highs. Interestingly, the A$ has now strengthened 5 weeks in a row and is up 5.3% in the last month alone.

With the US celebrating Martin Luther King Day today the early part of the week could easily see some consolidation, especially as we prepare for Thursday’s domestic Unemployment figures, Chinese GDP as well as US Building Permits. However, having said that, I can’t see much reason for a change of direction near term. A continuation of the grind higher, with the odd shallow dip it is then.

AUDEUR: Was a completely different story as news hit that German Politicians had come to an agreement the Euro strengthened and we fell away from the 2 month highs. The move was aided by a market still reacting to the more neutral tone the European Central Bank set in last Thursday’s communique. There is no EU centric data of note this week, so I can see a bounce, especially if the afore mentioned domestic data is as expected.

AUDGBP: Has also sunk as Sterling hit post-BREXIT highs versus the US Dollar, partly on news that the Dutch and Spanish support the UK to leave but stay as close to Europe as possible. The only reason for a reversal would be if the UK political situation was hurt again, but PM May appears to be holding the troops together for now.

 

Jim Devonport

E: jim.devonport@finport.com

M: 0415 066 468 

 

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