Further Strength for the Aussie Dollar on Back of Record Trade Surplus

Xe Corporate APAC

July 3, 2019 3 min read

The AUDUSD opens at 0.7034 (mid-rate) and the NZDUSD opens at 0.6704 (mid-rate) this morning.

The AUD is once again the best performing of the G10 currencies with yesterday’s record trade surplus and higher building approvals for the month of May supporting the dollar strength.

With exports rising faster than imports in May, Australia’s trade goods and services surplus surged from $4.82B in April to $5.74B in May. Economists had forecast the surplus to rise to $5.25B.

Building approvals for the month of May which were forecast to come in flat after falling 3.4% in April surprised to the upside, increasing by 0.7% in May. The surprise result was fuelled by approvals for non-house dwellings, which were up by 1.2%.

The USD finds itself on the back foot after this morning’s economic data releases disappointed. The initial sell-off was in reaction to the ADP private sector employment report which showed jobs increased by 102k in June below economists forecasts of a 140k jobs increase. Further downward pressure came after the ISM reported its non-manufacturing index fell to its lowest level since July 2017 and now sits at 55.1 following on from a 56.9 reading in May. The index had been expected to dip to 55.9.

In a separate report the Commerce Department said the trade deficit widened to $55.5B in May as the value of imports surged up by 3.3% compared with a 2.0% increase in exports.

The British pound continues to weaken as expectations that the BOE will be forced to cut rates increase. With the UK’s PMI data releases showing growth in Britain's services sector has stalled and Bank of England Governor Mark Carney warning that trade tensions and a potential no-deal Brexit were growing risks to the UK economy investors are now positioning there books for a rate cut later this year.

This morning's retail sales report will dictate direction for the AUD during our trading day with economist’s forecasting sales to increase by 0.2% following on from a 0.1% fall during the previous month.

Global equity markets are mixed - Dow +0.67%, S&P 500 +0.76%, FTSE +0.66%, DAX +0.71%, CAC +0.75%, Nikkei -0.53%, Shanghai -0.94%.

Gold prices continue to edge higher, up 0.8% trading at $1,418 an ounce. WTI Crude Oil prices are little changed trading at $57.02 a barrel.

Upcoming Data Releases

  • AU: Retail Sales MoM - 11:30 AEST / 13:30 NZST

Mid-Market Rates

AUDUSD0.70340.6%NZDUSD0.67040.5%AUDEUR0.62360.8%NZDEUR0.59450.6%AUDGBP0.55930.9%NZDGBP0.53310.7%AUDJPY75.850.5%NZDJPY72.310.4%AUDNZD1.04910.2%NZDAUD0.9531-0.1%GBPAUD1.7879-0.9%NZDCAD0.87610.2% GBPNZD1.8758-0.7%
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