Stephen Innes, senior trader at OANDA on the outlook for the $A: “We don’t even need a crystal ball for this view as the market had all but convinced itself that selling above .7500 is the trade.
“Action continues to pick up on the AUDNZD ( Dairy vs. Iron ore ) as we approach the critical 1.0600 level.Given the resilience in milk prices and the recent wobbles in iron ore, high NZD trade balance notwithstanding, a break of 1.06 should see significant buy-in which could pressure AUDUSD toward .7400 level.”
China is considering changes to the way it calculates the yuan’s daily reference rate against the dollar, a move that’s likely to reduce exchange-rate volatility. While the yuan has fluctuated in a narrow band around 6.9 per dollar for most of this year, the currency strengthened over the final two days of last week amid suspected government intervention. The yuan gained 0.1 per cent to 6.8622 per dollar as of 5.57pm local time on Friday, heading for the biggest two-day advance since late March.
By taking steps to scale back the market’s role in the fixing formula, authorities may undermine efforts to make the currency more freely traded, according to Tim Condon, head of Asia research at ING Groep NV in Singapore. “If the yuan endgame is a free float like the other major currencies, refining the PBOC fixing mechanism is a retrograde step,” he said.
Capital Economics rethink on sterling: “Our view that the pound’s recent rally can continue as the economy remains resilient and Brexit worries gradually ease has been dealt something of a double blow by the downward revision to Q1’s UK GDP figures and the YouGov poll for The Times showing a dramatic narrowing in the Conservatives’ lead over Labour to just 5 points.
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