AUD, NZD Rise as Markets Prepare for FOMC Announcement

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Headlines

  • ‘Aussie’ Shoots Higher as Risk Appetite Heats Up – AUD ignores falling business confidence
  • AUD/GBP Volatile on Inflation and Brexit – Price growth reaches near six-year high
  • AUD/EUR Rises Sharply on Poor ZEW Scores – Eurozone and German indices worsen
  • NZD Higher on Hopes for More Hawkish RBNZ Governor – Markets expect Adrian Orr will be more confident than predecessor Graeme Wheeler

Australian Dollar

Risk-appetite was on strong form yesterday, allowing the Australian Dollar to make bullish gains versus its peers. Markets weren’t perturbed by a slight weakening in the ANZ Roy Morgan weekly consumer confidence index, nor by a slump in the NAB business conditions and business confidence measures.

Reserve Bank of Australia (RBA) Governor Philip Lowe is expected to make a speech in Sydney today. If he seems upbeat about the Australian economy the ‘Aussie’ could rise.

Sterling

AUD/GBP had a volatile day, but the Australian Dollar held onto gains of varying degrees by the end of the session. News that November’s inflation rate had unexpectedly inched up to a six-year high of 3.1% unsettled markets, who don’t expect another interest rate hike from the Bank of England (BoE) any time soon. Also weighing on Sterling was the fact that Brexit Secretary David Davis had potentially derailed Brexit talks again by angering EU officials with comments over the weekend calling last week’s phase one deal more a ‘statement of intent’.

Given the impact of surging price growth upon wages, today’s average weekly earnings figures for the three months to October could have a significant impact upon the Pound.

Euro

The market shift towards risky currencies undermined demand for the Euro yesterday. Also weighing on the common currency were disappointing results from the latest ZEW sentiment surveys. The polls of investors and financial analysts found that Eurozone economic sentiment and German expectations had weakened.

Although the focus will be on the incoming US developments today and tomorrow, Eurozone industrial production figures for October could spark some Euro movement.

US Dollar

The US Dollar weakened versus the Australian Dollar, but was rising slowly against the other majors after a stronger-than-expected uptick in small business optimism for November. The index was expected to climb from 103.8 to 104 but instead jumped to 107.5. However, the proximity of the latest Federal Open Market Committee (FOMC) decision on interest rates kept the upside potential of the US Dollar limited.

Although high-impact US consumer price index figures are set for release today, the US Dollar may ignore the results, given that early tomorrow morning the FOMC will likely announce that it has hiked rates to 1.50%.

Canadian Dollar

The Canadian Dollar was not feeling the benefit of growing risk-appetite to the same extent as the Australian Dollar or New Zealand Dollar yesterday. The approach of key US oil inventories data and the FOMC interest rate decision both weighed on demand for the ‘Loonie’, with a complete lack of domestic data on the calendar leaving CAD rudderless.

New Zealand Dollar

Like the Australian Dollar, the New Zealand Dollar received a strong boost from US Dollar weakness yesterday. Speculation that new Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr will be more optimistic than his predecessor Graeme Wheeler further created demand for NZD.

Data Released

December 13th 08.15 AUD RBA Governor Lowe Gives Speech in Sydney
December 13th 19.30 GBP Average Weekly Earnings (3M/YoY) (OCT) 2.5%
December 13th 20.00 EUR Eurozone Industrial Production w.d.a. (YoY) (OCT) 3.3%
December 14th 05.00 USD FOMC Rate Decision (Upper Bound) (DEC 13) 1.50%

 Post by TorFX

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