ECB disappoints and overshadows improved trade rhetoric

AUD - Australian Dollar

The AUD opens this morning largely unchanged having enjoyed mixed fortunes through trade on Thursday. Edging higher throughout the domestic session the AUD found support in reports trade talks between the US and China were progressing well as the two economic superpowers scaled back existing tariffs while waylaying scheduled new tariffs. Edging toward 0.69 the AUD touched intraday highs at 0.6893 before profit taking and disappointment at the European Central Bank’s policy announcement forced a downturn and shift back toward 0.6875. Additional downward pressure came following an uptick in US inflation data. Underlying consumer prices jumped 0.3% in August the largest year on year gain in 12 months, back-ending an uptick in producer prices on Wednesday and forcing the AUD back nearer 0.6850.

Despite the uptick in inflationary pressure markets are still anticipating the Fed will cut rates next week in a bid to stimulate the slowdown in domestic economic growth. Expectations for a loosening of US monetary policy and improved trade rhetoric have helped the AUD hold onto recent gains and have opened the door for a break above 0.69 should risk appetite and broader optimism continue.

Attentions now turn to Friday’s US retail sales print for a deeper look into US economic performance.

Key Movers

The Euro advanced through trade on Thursday, rallying against the USD and key major crosses after the ECB failed to meet the markets dovish expectations. Having edged lower in the lead up to Thursday’s highly anticipated ECB policy meeting and minimum rate announcement the Euro lurched higher after policy makers announced a 10 basis point cut to interest rates while re-introducing quantitative easing. Markets had largely priced in the 10 basis point cut but were looking for more than the 20 billion Euro a month stimulus package. Investors were expecting the ECB to throw out everything they had in a bid to combat persistent stagflation and lacklustre growth and seemingly were left wanting. Having fallen to 1.0925 the Euro rallied through 1.10 to touch 1.1090 while key crosses suffered heavy mark downs with the AUD falling from 0.6287 to 0.6202 at time of writing.

Expected Ranges

AUD/USD: 0.6830 -0.6890 ▼

AUD/EUR: 0.6170 - 0.6190 ▼

GBP/AUD: 1.7730 -1.8130 ▲

AUD/NZD: 1.0670 - 1.0790 ▲

AUD/CAD: 0.9020 - 0.9090 ▲