Market wrap: Aussie drops on wave of dollar buying - Westpac

Analysts at Westpac explained that the Aussie fell from around 0.7515 at the Sydney close to 0.7450 in the London morning as part of a wave of US dollar buying against many currencies. 

Key Quotes:

"It later extended to 0.7434, a fresh low since June 2017. There was no obvious reaction to Australia’s federal budget.

The Australian government forecast the budget to improve from a deficit of 1.9% of GDP in 2016/17, to a deficit of 1.0% of GDP this financial year, narrowing a little to a deficit of 0.8% of GDP in 2018/19 (at $14.5bn), then moving to a small surplus in 2019/20, with the surplus widening to a forecast 0.8% of GDP in 2021/22. Over the five years, the budget position improves by 2.7ppts. The budget position has improved from that expected by the government in the December Mid-Year Economic and Fiscal Outlook, with the return to surplus brought forward a year to 2019/20.

The currency movement was concentrated in the London morning. EUR/USD fell from 1.1930 to 1.1838 (four-month low) before trimming losses a little in NY. GBP/USD traded a 1 cent range but was ultimately only slightly lower, around 1.3550. NZD/USD fell from 0.7030 to 0.6954 – the lowest since December 2017. AUD/NZD ranged sideways between 1.0680 and 1.0700, down slightly on the day due to Australia’s disappointing Mar retail sales data.

USD/JPY ranged sideways between 108.85 and 109.35, the safe-haven yen performing well. Its gyrations appeared linked to competing news stories before confirmation of what should have been very obvious, as US president Trump announced the US will withdraw from the 2015 agreement to curb Iran’s nuclear program and will reinstate financial sanctions on the country. Oil prices were also volatile around the announcement.

The US 10yr treasury yield rose from 2.95% to 2.98% and 2yr yields rose from 2.50% to 2.51%, inconsistent with the risk-averse theme in equities and currencies. In European trade though, Fed chairman Powell reiterated the Fed’s plan to continue raising rates. Fed fund futures yields continued to predict 2 rate hikes by year end.

Economic data was overshadowed, but still worth noting - US JOLTS job openings rose 472k to 6,550k – a record high since data started in 2000. The job openings rate rose to 4.2% from 3.9%, the hiring rate was steady at 3.7%, and quit rate rose to 2.3% from 2.2%. Overall it’s another indication of a tight labour market."