9th April 2019 - Aussie Dollar opens higher this morning as Oil rallies for 5 month high

The Australian Dollar opens up 0.3% higher this morning to 0.7125 as Oil prices reach a 5-month high with Brent crude adding another $0.75 to last week’s rally to trade at $71.09 and WTI crude is up $1.37 to $64.46, both to their highest since early November 2018. Fear of fresh supply outages from Libya are said to be responsible as ‘warlord’ Khalifa Haftar moves his self-styled Libyan National Army forces towards the capital Tripoli, base of the UN recognised government of PM Fayez al-Sarraj. Air strikes on Tripoli airport were reported overnight.

ECB is in no rush to revamp its negative interest rate policy design (i.e. possible ‘tiering’ of its negative deposit rates to limit the negative side-effects on banks). As such, it might be premature to suggest the ECB will further push out its guidance on how long it plans to keep its -0.4% Deposit Rate in place when it meets tomorrow.

AUD has lifted back more comfortably onto the 0.71 handle, up 0.3% to 0.7125, as part of the general lift to commodity linked currencies from oil and a generally softer USD.

Finally GBP hasn’t moved with no news of significant progress in the talks between the government and Labour party officials. Reports that May is considering giving MPs a vote on a second Brexit referendum in an attempt to break the deadlock in talks with the opposition Labour Party. May is desperate to find a compromise deal that she can present to the EU ahead of a crisis EU summit held on Wednesday where she plans to try to delay the 12th April deadline.

From a technical perspective, AUD/USD is currently trading at 0.7124. We continue to expect support to hold approaching 0.7090 while now any upward push will likely meet resistance around 0.7130.

Event Risk

- In Australia we have Feb housing finance data and consensus expectation is for the number of owner occupier approvals to rise 0.5%, and for the value of loans ex refi to be up 1.0% for owner occupiers and down 0.5% for investors. Industry data is hinting at a stabilisation after big falls in 2018 H2.

- In the US we have Mar NFIB small business optimism survey and Feb JOLTS data. The NFIB captures more than 50% of the private workforce in the US and sentiment has remained robust.

- In Brexit news, May will meet with Merkel and Macron in Berlin and Paris Tuesday, as she attempts to drum up support ahead of the EU Summit Wednesday.

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