AUD Tumbles on Gov. Lowe’s Comments, GBP Down After Services PMI

RBA Governor Lowe Puts a Rate Cut on the Table

The US dollar continued outperforming most of the other G10 currencies, gaining the most against AUD and GBP in that order. The greenback traded virtually unchanged only against JPY, CHF and SEK.

AUD/NZD — Technical Outlook

The Australian dollar took a strong hit overnight, selling off against all its G10 rivals. The New Zealand dollar got beaten as well, but still, it performed better against its neighbouring Aussie. This led AUD/NZD to break through a few of its key support areas and forced it to rush further down. Although we might see some correction back to the upside, AUD/NZD could continue traveling lower, at least in the short run.

Pound Slides on Services PMI, Broader Sentiment Stays Supported

Taking the second place among the losers was the British pound, though still far behind the Aussie. The slide in the pound started after the UK services PMI for January fell from 51.2 to 50.1, just a tick above the 50 barrier, which separates expansion from contraction. The forecast was for a fractional slide to 51.1. According to the report, concerns about the economic outlook weighed more heavily on staff recruitment, with an overall reduction in payroll numbers for the first time in just over 6 years. In the report it was also noted a decline in incoming new work, for the first time since July 2016.

GBP/USD — Technical Outlook

The British pound was one of those currencies that got hit yesterday as well, especially against the dollar, with Cable breaking its psychological 1.3000 hurdle. The pair found support at 1.2925, from which it corrected slightly back up. In our view, given that the pair is forming lower lows below the prior upside support line drawn from the low of January 2nd, there is a chance of seeing another leg of selling, especially if the rate breaks below yesterday’s low, at 1.2925.

As for Today’s Events

Today, we will get US data releases that were delayed due to the government shutdown. The 1st estimate of Q4 GDP is expected to have slowed to +2.6% qoq SAAR from +3.4% in Q3, something supported by the Atlanta Fed GDPNow and the New York Nowcast models. Durable goods orders and retail sales, both for December, are also due to be released. With regards to durable goods, expectations are for headline orders to have risen 0.8% mom, the same pace as in November, while core orders are anticipated to have rebounded 0.2% mom after sliding 0.3%. Headline retail sales are anticipated to have ticked down to +0.1% mom from +0.2%, while the core rate is expected to drop to 0.0% from +0.2%.

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