Market News & Analysis

Australian dollar tumbles; ASX to open flat

Feb 11, 2019 | Market Update

Upcoming high impact economic news:

20:30 GBP GDP
20:30 GBP Manufacturing Production
20:30 GBP Prelim Business Investment

03:15 USD Federal Reserve Governor Michelle Bowman speaks

FOREX

Well, it couldn’t get much worse for the Australian dollar. Or could it? The currency tumbled 2.43% against the USD last week. It’s now down a huge 9.29% compared to the same time 12 months ago, the biggest yearly decline witnessed across all major pairs. Against the Yen, the AUD is down 8.54% on year.

RBA Governor Philip Lowe is solely to blame for the rapid decline, after the bank’s first interest rate statement of 2019 failed to cause a reaction by sellers. In fact, the AUD/USD pair rose marginally during Tuesday’s session, a move the central bank wouldn’t have guessed. So, Lowe took the markets into his own hands by abandoning his stance on interest rate hikes, telling a Sydney luncheon rates are now “more evenly balance”. Well, didn’t that cause a stir. It was a bloodbath for the AUD/USD on Wednesday, tumbling more than 120 pips. The RBA’s monetary policy statement on Friday didn’t help with GDP and inflation forecasts both being cut. So, the currency pair fell another 10+ pips. Ouch!

The latest round of home loans data from the ABS and business confidence data from NAB on Tuesday will likely move the currency. Further weakness from the business sector could see the AUD/USD retest a low of 0.7028; a low seen on December 27.

In the United States, a speech by Federal Reserve Governor Michelle Bowman could provide insights on the central bank’s next move and whether the Fed will hike interest rates again this year. 

EQUITIES

This week the focus will be on equities as major ASX-listed companies prepare to release their half-year results, including Bendigo Bank, Amcor and JB Hi-Fi all due to release their earning today. Australian shares are poised to open the trading week flat with the SPI Futures down 4 points at 08:30 AEDT. It follows a mixed session on Wall Street during Friday’s session with the Dow Jones closing 63 points lower while the S&P 500 rose less than 2 points. The Nasdaq finished 0.14% higher. Ongoing uncertainty over trade talks between the United States and China weighed on investors, as well as slowing global economic growth. 

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