Daily Forex Commentary

19 January 2018 - AUD has another look at US 80 cents. NZD back at 73 cents. US Dollar falls on fears of a government shutdown.

By Nick Parsons

19 January 2018

Australian Dollar (AUD)

We said in our North American morning commentary that, “European traders seemed to like the employment report more than their Australian colleagues”. Indeed, by 2.15pm London time, the AUD was back on a US 80 cents big figure having been just below 0.7950 after the figures were released back home. It may be back at 80 cents, but that didn’t make it the best performer on the day; the AUD lost ground to the NZD, GBP and EUR to leave it very much middle of the global FX pack. There were certainly plenty of positive headlines in the labour market report for the offshore market to digest. Employment rose by a seasonally adjusted 34,700, beating consensus expectations of a 15,000 increase. Employment has now increased in each of the past 15 months, which equals the longest consecutive streak on record. One more positive month in January would be the longest uninterrupted period of jobs growth since the survey began in 1978. Full-time employment increased 15,100 to 8,518,900 in December and part-time employment increased 19,500 to 3,921,800. The ABS noted that, "Full-time employment has now increased by around 322,000 persons since December 2016, and makes up the majority of the 393,000 net increase in employment over the period," It was the fastest growth over a calendar year on record, and the second fastest over any 12-month period, only beaten by a 409,300 increase in August 2005. Perhaps it was news that the unemployment rate however rose to 5.5% from 5.4% which had depressed the AUD in Sydney trading yesterday. This was due to much stronger labour-force participation which might indicate some further spare capacity in the labour market and therefore a lack of wage pressure. Unlike the United States or UK, Australia doesn’t publish earnings data at the same time as the jobs numbers so we’ll only have some patchy survey evidence and anecdotal evidence to go on. There are no data locally this Friday and the AUD opens in Asia at USD0.7995 with AUD/NZD at 1.0940 and GBP/AUD1.7375.

New Zealand Dollar

AUD/NZD expected range: 1.0905 – 1.0990

The New Zealand Dollar was again very well bid on Thursday, vying for top spot with the British Pound. During the Asian morning, NZD/USD had fallen below USD0.7250 but from there it was a pretty much uninterrupted journey back on to a US 73 cents handle early in the European afternoon. It didn’t quite breach the 2018 high of USD0.7330 seen on Wednesday, but did get to within almost 10 pips of that peak. According to the REINZ, median house prices across New Zealand rose by 5.8% in 2017 to $550,000; up from $520,000 in December 2016. Median prices for New Zealand excluding Auckland increased by 6.6% to $450,000 whilst Auckland’s median house price increased to $870,000 from $855,000 in December 2016. 13 out of 16 regions saw prices increase in December, with three of those regions experiencing record prices; Waikato, Bay of Plenty and Wellington. As REINZ also noted, “When looking at the Auckland picture, this is the first time that all seven districts have had a median price of in excess of $700,000 highlighting how expensive the city is becoming”. Even more interesting, perhaps, is the Department of Internal Affairs data on baby names. Charlotte and Oliver have topped the list of New Zealand’s most popular baby names for 2017. Charlotte is up from second last year whilst 2017 is the fifth year in a row that Oliver tops the boys’ list. Taking a longer historical view, analysis by stuff.co.nz shows Michael is the most popular name of the past 60 years in New Zealand. More than 40,000 babies have been named Michael since 1954, after which comes David (36,792), James (27,224) and John (26,867). All the names in the Kiwi top 10 are male. The top-ranking girls'' name is Sarah, at number 12, which has been given to 19,901 babies in the past 60 years, followed by Karen at number 22 (13,524) and Emma at number 23 (13,245). We might not be able to explain why the NZD is going up or down, but we know the names of those who it affects and what their house is worth! The NZD opens in Asia this morning at USD0.7310 with AUD/NZD at 1.0930.

Great British Pound

GBP/AUD expected range: 1.7280 – 1.7490

The British Pound continues to trade in quite wide ranges against the USD though with a low around 1.3805 it didn’t quite repeat Wednesday’s feat of trading on three different big figures during the day. And, though it did get on to 1.39, it fell short of the previous day’s 2018 peak of 1.3930. The only economic data released Thursday showed the UK housing market in stark contrast to that in either Australia or New Zealand. The Royal Institution of Chartered Surveyors monthly report on residential property market in December showed buyer interest edging lower whilst changes to purchase taxes for first time buyers are having little or no immediate effect. After new buyer enquiries came close to stabilising in November, 15% more respondents noted a decline in demand (as opposed to an increase) in the month of December. Furthermore, when contributors were asked whether they have seen an increase in first time buyer enquiries following changes to Stamp Duty in the Autumn Budget, an overwhelming majority of 86% across the UK said they hadn’t. Agreed transactions also fell at the national level with 13% more respondents reporting a decline in volumes over the month. Significantly, Scotland, Northern Ireland and the North East region were the only areas to suggest stronger transactions, whereas sales trends were either flat or negative across the rest of the UK. It could be a very long Winter for Estate Agents. Today we’ll get the December retail sales figures. There has been a significant shift in buying habits as a result of Black Friday promotions a month before Christmas. Volumes ex-fuel rose +1.2% in November but are expected to show a -0.9% drop in December. The British Pound opens in Asia this morning at USD1.3895, AUD1.7375 and NZD1.9010.

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