In the Sydney trading session the Aussie dollar initially rose versus its main peers, as the latest positive jobs and unemployment data was released. The unemployment rate remained at 5%, the economy added double the amount of jobs forecast at 31.9k, whilst the labour participation rate also grew. As the data was published AUD currency pairs made gains, such as AUD/USD, which pushed up through the daily pivot point, reaching R2, and printing a daily high of 0.720. However, the gains for the Aussie versus its peers and for the other Australasian currency, New Zealand’s (kiwi) dollar, were quickly eradicated, as the commodity currencies reacted to a shock, breaking, news event.
Customs officials at China’s northern Dalian port, have banned imports of coal from their major supplier Australia. The indefinite ban on coal imports from Australia, which will retrospectively apply from the beginning of February, has come into practice as other major ports elsewhere in China have prolonged the clearing times for Australian coal, to at least forty days. The significance of this measure should not be underestimated, or overlooked; Australia’s economy has grown over recent decades due to its mineral and energy trading with Asia. In crude terms; the country has carved out huge chunks of its landscape and ground, filtered it and then delivered the raw, industrial products, to countries such as China.
If this ban on coal is extended to other mineral products, the Australian economy will suffer. For example; Australia is the world’s leading exporter of iron ore by some margin, enjoying a 58% share of the global $66.6 billion market, with their nearest rival, Brazil, being responsible for 20% of that annual export total. Whilst coal is the country’s second largest export, China is their biggest customer and Australia is the world’s largest coal exporter; accounting for 35% of all coal exported.
At 9:00am U.K. time AUD/USD traded down 0.82%, maintaining its bearish position close to the third level of support, S3. A similar pattern of losses was experienced by the Aussie versus its other peers. New Zealand’s dollar was caught in the collateral damage, due to its reliance on exports to China and its value as a commodity currency; NZD/USD traded down 0.56% at 9:00am U.K. time. After slumping through S3, the commodity pair recovered marginally, to trade just above S3, at 0.681.
Sterling recorded steady gains versus its main peers during the Asian session, the increases were added to in the early part of the London trading session, after the U.K. chancellor of the exchequer Philip Hammond, opined that a no deal Brexit looks unlikely. He intimated that Parliament would be prepared to back the Brexit withdrawal offer, which was voted down by a record number in January. Another meaningful vote is now expected next week, before the end of February.
However, that decision is not Hammond’s or the U.K. government’s to make, there are far too many warring factions across the benches in the House of Commons, for him to deliver such a pronouncement, with any conviction. Nevertheless, sterling reacted positively to the possibility of Parliament backing the original withdrawal deal; GBP/USD traded up 0.16%, just below R1, maintaining position above the 1.300 handle, at 1.306. Sterling made solid gains against its others peers, most notably versus: AUD, NZD, and CHF.
The U.K. pound was also boosted by public finances hitting a record surplus of £14.9b in January, due to strong income tax receipts, beating City expectations of a £10.05b surplus, compared with borrowing of £3b in December. The figure comes just ahead of the chancellor’s spring statement, due on 13th March. The U.K. FTSE 100 traded down 0.62%. The index was impacted by energy supplier Centrica announcing that it lost 742,000 customers in 2018, whilst the energy price cap instigated by OFGEM, coming into full effect in 2019, is also likely to impact on future profits.
A raft of IHS Markit PMIs relating to the Eurozone, were published on Thursday morning. Chris Williamson, the chief business economist at IHS Markit, suggested the surveys indicate the eurozone economy is on course to grow by 0.1% in the first quarter of 2019. Mr. Williamson stated;
“The Eurozone economy remained close to stagnation in February. The flash PMI lifted only slightly higher during the month, continuing to indicate one of the weakest rates of expansion since 2014. The survey data suggest that GDP may struggle to rise by much more than 0.1% in the first quarter. The weakness is being led by manufacturing, which has now entered its first downturn since mid- 2013. With factory order books deteriorating at an increased rate, the rate of contraction in the goods-producing sector will likely worsen in coming months.”
The most concerning PMI readings related to German manufacturing, which came in at 47.6 and Eurozone manufacturing at 49.2. Both readings are below the 50 metric, which divides contraction from expansion. However, other PMI readings beat the Reuters forecasts.
The euro gave up its gains versus many of its peers (with the exception of AUD and NZD), generated earlier in the London session, as the PMI data was broadcast, EUR/USD fell from above the daily pivot point, to trade close to S1. At 1.132 the currency pair was trading down 0.05%. Two key Eurozone equity market indices traded in narrow ranges, the DAX traded up 0.15% and CAC traded close to flat.
The U.S. dollar firmed versus several peers during the Asian and London trading sessions, at 10:15am the dollar index, DXY, traded up 0.15% at 96.60. USD/JPY traded at 110.7 down 0.11%, whilst versus the Swiss franc the dollar was close to parity, USD/CHF trading at 1.002. Focus on the dollar will intensify this afternoon, during a busy session for economic calendar releases, relating to the USA economy.
Several PMIs are published, as are the latest unemployment claims (weekly and continuous), whilst the durable goods data will shine a light into the conscious confidence of consumers; how confident are they, in both their finances and present situation, to purchase consumer durables? At 10:20am the futures markets for the leading U.S. indices were indicating a positive open for the New York session; SPX up 0.16% and the NASDAQ up 0.25%.
