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AETOS Market Commentary 06/03/2019

AETOS Capital Group Partnership


The Aussie fell further, continuing its bearish run, closing at 0.7081(-7 pips) against the greenback, as RBA maintained interest rates at 1.5%, which was widely expected.

Yesterday, news also indicated that China has lowered its 2019 GDP growth target to a range of between 6% to 6.5%. Turning to the day ahead, the performance of the Australian dollar in Asia will likely be determined by two events.

The first, a speech from RBA Governor Philip Lowe at 9.10am AEDT on “The Housing Market and the Economy” and, secondly, the release of Australia’s Q4 GDP report at 11.30am AEDT.“We see a risk that AUD/USD declines towards 0.7000 if Q4 Australian GDP is soft and Lowe strikes a cautious tone in his speech,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank. Despite the GDP being a lagging indicator as it provides us with information in the past, it still has significant implications for unemployment, inflation, investment, household incomes and government tax receipts in the future.

After thriving in the first half of 2018, growth decelerated sharply in the September quarter, contributing the RBA abandoning its previously held view that the next move in Australia’s cash rate was likely to be up rather than down. Growth is expected to remain weak, or slow even further, in the December quarter.


The Euro closed lower on Tuesday as well, closing at 1.1299(-37 pips) against the greenback. EUR/USD pair fell to a fresh 2-week low of 1.1289 in the US session, as stronger-than-expected US data gave the greenback the push it needed to break higher.

Despite starting the week with the wrong footing, the American dollar managed to recover ground on a bout of risk aversion, retaining its strength despite the market's sentiment deteriorated mid-Monday, indicating that somehow, the market is making its mind in favor of the dollar, in an environment characterized by slowing economic growth and neutral central banks.

Markit released the final versions of February Services PMI for both economies, with the EU one revised up to 52.3, while the Composite index printed 51.9, indicating firmer growth in the private sector economy when compared to January, according to the official report.

Also, Retail Sales in the Union came in better-than-expected in January, rising by 1.3% MoM and by 2.2% YoY. However, positive EU data failed to boost the pair, which extended its decline after US figures came upbeat. The Markit Services PMI came slightly below the market's estimate of 55.8, printing 55.5, although the official index, the ISM Non-Manufacturing PMI printed 59.7 from 56.7 in January, its biggest gain in a year. Today the EU's calendar has nothing scheduled, while the US will release the ADP employment preview, expected to show that 189K new jobs were added in February, and the December Trade Balance, with the deficit foreseen at $57.0B


The Pound also weakened on Tuesday, weakening to 1.3146(-31 pips) against the greenback. Broad dollar's strength took its toll on the pair, but also aided by weaker than expected UK data and not-so-encouraging Brexit headlines.

First, it was the Fin Min Hammond, who said that he wasn't expecting a breakthrough in conversations between UK Attorney General Fox and the EU's Chief Brexit Negotiator Michel Barnier. Later, UK's McDonnell said that not many Labour MPs are likely to back May's Brexit plan when it gets to the Parliament next week.

The UK Markit Services PMI, which resulted at 51.3 in February, recovering from a previous 50.1, hid that employment fell at the fastest pace since November 2011. BOE's Carney testified before the House of Lords, and among other things, said that investors had not priced in enough monetary tightening ahead.

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The information above is of general nature only and does not take into consideration your objectives, financial situation or investment needs. The products and services provided are issued by AETOS Capital Group Pty. Ltd. (AFSL: 313016, ACN: 125113117). Trading Forex margin and CFDs carries a high level of risk, and losses can exceed your deposits. You are strongly recommended to seek independent financial advice before you make an investment decision. Please refer to our Product Disclosure Statement which you can obtain from our website for more details. AETOS has the ownership of the contents of this FX commentary. Copying, reprinting or publishing to a third party is not permitted.

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Source: https://www.aetoscg.com/uk/market-commentary
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