10th July 2019 - AUD/USD steadies near 0.6930, looks to close at 2-week lows

Good Morning,

Market Headlines

- Markets remained side-lined ahead of Fed Chair Powell’s testimony tonight, the US dollar and interest rates slightly higher, equities slightly lower.

- US small business sentiment eased in June, the National Federation of Independent Business’ index slipping to 103.3 from 105.0, though still near record highs. Hiring intentions, compensation plans and capex plans cooled while selling prices jumped, likely reflecting the increase in US tariffs $250bn in goods from China to 25% from 10%.

- US job openings were little changed in May at 7.32mn from 7.37mn in the prior month. The number of positions waiting to be filled still comfortably exceeds the ranks of the unemployed by 1.4mn.

- Iron ore rose 3.3% to $122.20 on lingering concerns about supply, while copper fell 1.1% to $262.25 – a one-month low – on concerns about global economic


- The US dollar index is up 0.1% on the day, and at a three-week high.

- EUR eked a slightly lower range of 1.1193-1.1215, making a four-week low.

- USD/JPY extended its recent rally from 108.70 to 108.96 – a six-week high.

- Underperformer AUD extended the recent decline from 0.6960 to 0.6921 – a three-week low.

- NZD similarly fell from 0.6630 to 0.6601.

- AUD/NZD fell from 1.0500 to 1.0480.

AUD Thoughts

AUD/USD steadies near 0.6930, looks to close at 2-week lows

- Lack of progress on US-China trade talks hurt antipodeans.

- US Dollar Index climbs above mid-97s on Tuesday.

- Coming up: Westpac Consumer Confidence from Australia.

The AUD/USD pair came under pressure during the Asian trading hours after the National Australia Bank's Business Confidence dropped to 2 in June from 7 in May. After falling to its lowest level in two weeks at 0.6920 in the early European morning, the pair started to consolidate its daily losses and was last seen trading at 0.6930, losing 0.6% on a daily basis.

In addition to the disappointing data from Australia, the lack of progress in the U.S.-China trade talks seems to be weighing on the antipodeans as well. Earlier in the American trading hours, the U.S. Commerce Secretary Wilbur Ross said that they have decided to keep Huawei on the blacklist known as the Entity List. On the other hand, the South China Morning Post in a report claimed that Chinese President Xi refused to make a specific commitment to agricultural purchases at G20, "signalling a new and tougher stance towards trade talks from Beijing."

On the other hand, boosted by the receding hopes of the Fed making an aggressive dovish shift in its policy outlook after Friday's strong NFP data, the US Dollar Index extended its rally into a fifth straight day and touched its highest level since June 19 at 97.60 to further weigh on the pair.

In the early trading hours of the Asian session, the Westpac Consumer Confidence Index from Australia will be looked upon for fresh impetus.

Event Risk Data Today

- NZ: June food prices and REINZ house sales are out today.

- Australia: Jul Westpac-MI Consumer Sentiment was last at 100.7. Today’s survey was in the field over the week to Jul 6 and will capture the consumer’s response to the RBA’s second rate cut as well as the passing of the Government’s tax package through Parliament.

- China: CPI and PPI data are released.

- UK: May GDP is anticipated to recover 0.3% following a 0.4% decline in Apr.

- US: Fed Chair Powell delivers his semi-annual testimony to the House and the Jun FOMC minutes are released. Both will be scrutinised for confirmation on a July rate cut as well as the extent of any more easing to follow. Other Fedspeak involves Bullard at the OMFIF conference at Washington University.

- Canada: the BOC meeting is anticipated to leave policy on hold on the back of improved business sentiment and inflation above 2%.

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