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AETOS Market Commentary 05/03/2019

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AUDUSD

The Aussie fell and closed lower on Monday, closing at 0.7086(- 12 pips) against the greenback.

The Australian dollar rose modestly against most major crosses on Monday as renewed optimism towards US-Sino trade negations was offset by increased speculation that Australian economic growth remained sluggish in the December quarter, increasing the probability of an interest rate cut from the central bank of Australia (RBA). After beginning the week at .7080, the AUD/USD jumped in early Asian trade on a report from the Wall Street Journal that the United States and China were on the cusp of reaching a trade agreement, potentially as soon as the end of this month.

The news saw the AUD/USD jump to as high as .7118 but the gains couldn’t be sustained, hinting that a trade deal has now all but been priced in by financial markets. Turning to the session ahead, the economic calendar will be dominated by services PMI reports from around the world along with the last of Australia’s Q4 GDP inputs.

Moreover, government demand and Balance of Payments figures for the December quarter will both arrive at 11.30am AEDT. Within the latter, net exports are expected to slice 0.1 percentage points from Q4 GDP. As for government demand, Westpac economists are looking for a quarterly increase of 0.4%, an outcome that will add modestly to GDP.

Before the GDP partials arrive, the latest Australian Performance of Services Index from the Ai Group, along with the weekly ANZ-Roy Morgan Australian consumer confidence index, will hit at 8.30am and 9.30am AEDT. Topping off a busy domestic events calendar, the RBA will also announce its March interest rate decision at 2.30pm AEDT.

While no change is expected, traders will be monitoring for any signals on the likelihood for a rate cut given a continued deterioration in most Australian economic indicators.

EURUSD

The Euro fell to 1.1337(-37 pips) against the greenback on Monday. The dollar gapped lower at the weekly opening, from assorted headlines coming from US President Trump, as he cheered progress with China on trade talks, spurring demand for high-yielding assets, and criticizing the Fed's policy of higher rates, hitting the USD.

The pair traded as high as 1.1380 before the positive momentum began fading, even despite European data released was better-than-expected, as the Sentix Investor Confidence improved in March to -2.2 from the previous -3.7, while producer prices rose in Feb by 0.4% MoM and by 3.0% YoY, also beating the market's forecasts. The dollar rose with no clear catalyst, accelerating its recovery during US trading hours, with buyers ignoring soft macroeconomic releases.

The February ISM-NY Business Conditions Index printed 61.1 vs. the previous 63.4, while Construction Spending shrank in December, falling a 0.6% vs. an expected 0.2% advance. Part of dollar strength was a result of increased demand for government bonds, which in result, pushed yields away from the 1-month high reached late last week. Equities soared in Asia, barely stayed afloat in Europe, to finally turned red in the US, also favoring the dollar and in detriment of the high-yielding EUR.

Today, the macroeconomic calendar will be quite busy, as it includes the final versions of the Services and Composite PMI for the EU and the US, European Retail Sales for February, seen growing by 0.8% MoM and 1.2% YoY. The US will release Building Permits, New Home Sales and the final versions of the official and the Markit PMI. US housing data is expected to disappoint, although growth in the services sector is foreseen steady at healthy levels.

GBPUSD

The Pound also weakened on Monday, closing at 1.3175(-62 pips) against the greenback.

The cable pair started the week with a firmer tone as investors chose to dump the greenback following weekend news, although UK data put some weigh on it, as the Markit Construction PMI posted its first decline in almost a year, printing 49.5 in February from 50.6 in January.

In the Brexit front, UK PM May's spokesman said that the government is still focused on leaving on March 29, and wants the Parliament to vote on a Brexit deal next week, on March 12, adding that anyway, "more work needs to be done," when talking about negotiations with the EU. British Brexit Secretary Barclay and Attorney General Cox will be traveling to Brussels on Tuesday for talks with the European Union's Chief Brexit negotiator Michel Barnier, while the macroeconomic calendar will offer the BRC survey on sales and Markit will release the February services PMI for the kingdom, foreseen at 49.9 vs. the previous 50.1.

Risk Disclaimer

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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