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Latest information and news on foreign currency exchange.

FX Compare has collected for you the latest news and current affairs in the world of foreign exchange. You may find information that can help you decide whether now is the perfect moment to lock in your exchange rate and make your international money transfer or wait until the situation is in your favour.

We have expert traders who also contribute their opinion on the exchange rates that could help with you with exchange rate forecasting.

By Nick Parsons

USD volatile but net unchanged. EUR slides after ECB meeting. GBP mixed on Brexit news but AUD and CAD both surge.


Australian Dollar

AUD

Expected Range

The Australian Dollar had a much better day than its cricketers on Thursday, though few people would bet against a reversal of the fortunes of both by next Monday. It has now enjoyed four consecutive days of gains and there’ll be huge sighs of relief from those who observed the squeeze in the Kiwi Dollar on Monday and thought it might be prudent to scale back their Aussie shorts too. Having jumped from USD0.7630 to 0.7668 on publication of the latest jobs report, the AUD then managed to hold on to these gains for the next 18 hours, closing in New York around 0.7670.<br> <br> To recap the numbers, consensus estimates were for a 19,000 increase in employment with the jobless rate steady at 5.4%. According to the Australian Bureau of Statistics (ABS), employment actually jumped by 61,600 to 12.4 million in November. It was the largest monthly increase since October 2015, whilst the previous month’s figure of +3,700, was also revised up to show a gain of 7,800.<br> <br> The figures are arguably not quite as good as they look. Every month the sample of the population in the survey is rotated and it appears the incoming group may have had higher levels of employment than those who left the survey. Nevertheless, the rest of the report was very strong indeed. Full-time employment jumped by 41,900 to 8.5 million, beating a 19,700 increase in part-time employment which rose to 3.9 million. Over the last 12 months, full-time employment has increased by 304,600, with a 78,700 increase in part-time employment. Combining the two, total employment has increased by a huge 383,300 whilst the total number of hours worked by all Australians is up by 9.8 million hours, or 0.6%, to 1.7409 billion hours.<br> <br> The AUD opens in Asia this Friday at USD0.7675 with the AUD/NZD cross up almost exactly a cent from yesterday morning at 1.0970.

British Pound

GBP / AUD

Expected Range

The British Pound had a much better day than might have been expected on Thursday, rising against most currencies except the newly-buoyant Australian Dollar and Canadian Dollars. Its best performance came – in order - against the NZD, EUR and USD.<br> <br> Political commentators have been busy trying to work out the implications of the UK Government’s defeat on a parliamentary vote on Brexit. On the one hand, any defeat for the Prime Minister is something which will weaken her authority and arguably put her in a weaker negotiating position in Brussels. On the other, the substance of the new 24-word Bill is to give Parliament a vote on the final terms of the Brexit deal. Essentially, it means that MPs could reject the terms of any withdrawal — or amend the legislation to delay Brexit — if they are not satisfied with the deal negotiated. In the event of “no deal” the amendment could be used by MPs to try to reverse Brexit. To the extent that it leaves the door open to a rejection of Brexit, this could perhaps be interpreted as a GBP positive, although the immediate impact might well be to toughen the Government’s rhetoric. As with most things Brexit, it’s a mess. In economic data, retail sales rose a faster than expected +1.1% in November though the official statisticians cautioned they are having problems adjusting for the impact of Black Friday/Monday promotions and internet sales. Electrical household appliances, for example, jumped by nearly 9% in one month.<br> <br> Separately, the Bank of England MPC voted unanimously 9-0 in favour of no change in Bank Rate. Its accompanying Statement read very cautiously, stressing that the pace of future rate hikes would be very gradual and limited in extent. It reiterated its judgment that that “inflation is likely to be close to its peak, and will decline towards the 2% target in the medium term.”<br> <br> The GBP opens in Sydney this morning at USD 1.3440, AUD1.7510 and NZD1.9215. The cricketers open at 305-4 in Perth. Those who love a bet will be wondering whether the currency or the sportsmen crumble first…

Canadian Dollar

AUD / CAD

Expected Range

The Canadian Dollar did extremely well on Thursday and knocked the AUD off top spot in the one-day performance table. We’ve been flagging up here all week the fascinatingly-titled speech from Bank of Canada Governor Stephen Poloz on “things that keep me awake at night”. He did not disappoint. He is always a wonderfully thought-provoking speaker, never afraid to go against the prevailing G7/BIS consensus and full of insight into the policy-making process. He is a very under-estimated Central Banker; erudite but self-deprecating in equal measure.<br> <br> His speech to the Canadian Club in Toronto is worth reading in full. To summarize briefly here, the three issues were cyber threats, high house prices and “The tough job market for young people”. He also threw in a wonderful dismissal of bitcoin: “the term “cryptocurrency” is a misnomer: “crypto,” yes, but “currency,” no. For something to be considered a currency, it must act as a reliable store of value, and you should be able to spend it easily. These instruments possess neither of these characteristics, so they do not constitute “money.”<br> <br> Overall, the context of his speech was that the Canadian economy is doing extremely well and is at a “sweet spot” in the economic cycle. “The economy has made tremendous progress over the past year, and it is close to reaching its full potential. We are very encouraged by this, and we are growing increasingly confident that the economy will need less monetary stimulus over time.”<br> <br> Needless to say, currency markets loved this speech. USD/CAD tumbled a full cent to a one-week low of 1.2735 whilst even AUD/CAD fell 40 pips from its high to open in Asia this morning around 0.9780.

Euro

AUD / EUR

Expected Range

Another day, another set of broad-based losses for the EUR which completely unwound all of Wednesday gains against the US Dollar and finished firmly in bottom spot on the one-day FX performance table. EUR/USD fell from a high of 1.1844 to 1.1772 with AUD/EUR up from 0.6470 to 0.6510.<br> <br> Yet again, the currency’s fall comes despite very positive incoming economic data; this time another very strong set of ‘flash’ PMI data in the Eurozone. Markit’s Press Release was full of seasonal good cheer. “The eurozone economy picked up further momentum at the end of 2017, with December seeing the fastest growth of business activity for nearly seven years. The best factory output and order book gains since 2000 pushed the manufacturing headline PMI to a record high, while an upturn in service sector to growth to the highest since early-2011 underscored the broad-based nature of the current surge in activity”.<br> <br> As for the ECB meeting, new staff economic projections showed upward revisions to growth forecasts. 2018 GDP is now seen at 2.3% (previously 1.8%) with 2019 at 1.9% from 1.7%. 2018 CPI was nudged up from 1.2% to 1.4% though 2019 and 2020 were left unchanged at 1.5% and 1.7% respectively. The Introductory Statement was basically a “copy/paste” job from October and Mr Draghi had so little to say the Press Conference actually finished 7 minutes ahead of schedule.<br> <br> EUR/USD opens in Asia this morning at 1.1795 with AUD/EUR at 0.6505.

New Zealand Dollar

AUD / NZD

Expected Range

Three straight days of gains proved to be quite enough for the New Zealand Dollar which found the air a bit thin above US 70 cents. It peaked just as Janet Yellen finished her last FOMC Press Conference at 0.7025 and has spent the last 24 hours edging steadily and gradually down to reach a low of 0.6981 before closing in New York around USD0.6990.<br> <br> On Thursday, the new Labour-led Government in New Zealand released its Half-Year Economic & Fiscal Update. It forecast that economic growth would average close to 3 per cent over the next five years, peaking at 3.6 per cent in 2019. Unemployment is also forecast to fall to 4 per cent, despite hikes in the minimum wage pushing wage growth significantly higher. The forecast sees revenue growth rising sufficiently to see net debt fall to below 20 per cent of gross domestic product by 2022, a core election promise of Finance Minister Grant Robertson.<br> <br> The general consensus amongst analysts locally is that the Government is being too optimistic and has presented what is more likely a “best-case” scenario. Responding to criticism, Treasury secretary Gabriel Makhlouf said the forecasts assumed the sharp drop in business confidence since the election was assumed to be only temporary and would soon rebound. NZD/USD opens in Asia this morning at 0.6990 with NZD/EUR at 0.5930 and GBP/NZD at 1.9215.

United States Dollar

AUD / USD

Expected Range

A quick look at the US Dollar index tells you that the USD had a good day on Thursday. A closer look behind the scenes, shows this is not strictly true. The EUR had a very poor day and as it comprises 57% of the index (which we highlighted here earlier this week), so the USD index was able to fight back. Having tumbled from a high on Tuesday afternoon in New York of 93.81, it had fallen almost a full point to 92.95 in Sydney yesterday morning. As EUR/USD then fell more than half a cent, the USD index climbed back to 93.30; regaining almost exactly half its losses over the period.<br> <br> No matter how many times the Fed Statement is read and re-read (and your author has been doing this for longer than is healthy!) it is extremely difficult to pin the blame for any of the Dollar’s declines on the text therein: “the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong.” Its new economic projections revised up 2018 GDP forecasts from 2.1% to 2.5% with further more modest upgrades to the outlook in 2019 and 2020. Though two of the nine voting members dissented, there were no downward revisions to future ‘dot points’ and the belief that inflation would indeed pick up was again reiterated.<br> <br> We’d say the US Dollar fell despite the Statemen, not because of it. And if we may re-quote Dr. Yellen’s very last sentence from her very last FOMC Press Conference, “let me emphasize the correlation is not causation.” OK, she was talking about the shape of the yield curve rather than currency markets but it’s a point that always bears repetition when looking at the multiple drivers of foreign exchange each day.<br> <br> In US economic data, retail sales increased more than expected in November as the holiday shopping season got off to a strong start. The Commerce Department said retail sales rose 0.8% after an upwardly-revised 0.5% increase in October. The annual pace of growth accelerated to 5.8%. The Labor Department meantime said initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 225,000 for the week ended December 9. That was the lowest reading since mid-October when claims dropped to 223,000, a level not seen since March 1973.<br> <br> The US Dollar index opens this morning at 93.00 with Friday bringing data on the Empire manufacturing survey and industrial production.

By Nick Parsons

FOMC brings no surprises but USD suffers sharp sell-off. AUD and NZD best performers, UK Government defeated in Brexit vote.


Australian Dollar

AUD

Expected Range

The Aussie Dollar had a good day on Wednesday, getting back on to a US 76 cents big figure for the first time in just over a week even before the FOMC Statement. This was partly because traders didn’t want to be caught short of AUD ahead of today’s Australian labour market report, and partly because the takeover of Sir Frank Lowy's Westfield Corporation - in a deal said to be worth AUD$32.7 billion – has prompted thoughts of some ‘pre-hedging’ of the foreign exchange transactions associated with the deal.<br> <br> Founded in Sydney in 1953, Westfield currently has interests in 35 shopping centres in the US and the UK and its chairman received a knighthood from the Queen at Windsor Castle just a few days ago for his contribution to the British economy. French company Unibail-Rodamco will acquire Westfield for a combination of shares and cash, and though the 35% cash element won’t be paid until next year, there could be some early structured purchases of Aussie Dollars, whether in the spot, forward or derivatives markets.<br> <br> Looking forward to today’s Australian economic data, consensus estimates are for a +15k increase in employment with the jobless rate steady at 5.4%. Unlike many countries elsewhere in the world, Australia doesn’t produce monthly earnings data alongside the labour report; instead the wage price indices are available only quarterly and we’ll have to wait until February for the latest updates.<br> <br> Having reached a pre-FOMC high of 0.7612, the Aussie Dollar extended its gains to a best level just above 0.7630 (the highest in 8 days) which is where it opens in Asia this morning with AUD/NZD at 1.0870.

British Pound

GBP / AUD

Expected Range

The Pound had a very mixed session on Wednesday ahead of a key Parliamentary vote that would require the Prime Minister to write the terms of her Brexit deal into a law that would have to be passed by Parliament. Just as we publish this morning note in Sydney, it has been announced that Prime Minister Theresa May suffered a defeat with 12 of her own backbenchers joining with Opposition MP’s to defeat the Conservative/DUP Coalition Government. We will have to wait until the start of the UK morning on Thursday to assess the implications of this in a little more detail.<br> <br> The latest UK economic data had something for everyone but on balance were a bit disappointing. The total jobless number fell by 26,000 in the last 3 months to 1.43m, taking the unemployment rate down to a 42-year low of just 4.2%. But, the total number of people in work fell by 56,000 in the last quarter; the biggest drop in more than 2 years. The simultaneous fall in employment and unemployment is possible because there has been a large increase (115,000 over the quarter) in the number of economically inactive. As for wages, the 3-month average measure of total pay rose to 2.5% but is still below the rate of inflation. Real wages in the UK have now fallen for 8 consecutive months and show few signs of picking up any time soon.<br> <br> Ahead of the FOMC Statement, the pound rose against the USD and CAD, but fell once more against the Australian and New Zealand Dollars. With the USD generally in retreat after the Fed, GBP/USD extended its gains to 1.3410, though the Pound fell further against the relatively buoyant Australian and New Zealand Dollars. GBP opens this morning at USD1.3410 with GBP/AUD at 1.7565 and GBP/NZD1.9085.

Canadian Dollar

AUD / CAD

Expected Range

There’s been so much to keep the foreign exchange market busy over the past few days that the Canadian Dollar has largely been overlooked. For most of Wednesday, USD/CAD was trapped in a very narrow range from 1.2845 to 1.2875 even as oil prices fell quite sharply during the North American morning. NYMEX crude fell almost a full dollar to $56.74; its lowest level since last Friday morning even though industry data showed a larger-than-expected drawdown in U.S. crude stockpiles.<br> <br> Sometimes, the CAD is correlated almost 100% with intra-day and day-to-day swings in oil prices, yet at others it seems to have no impact whatsoever. It’s certainly frustrating both for those investors seeking to set trading rules and the analysts who are trying to explain the changes in the external value of the currency.<br> <br> We’ll finally get to hear what issues are keeping Bank of Canada Governor Stephen Poloz awake at night when he speaks at lunchtime in Toronto today. The consensus amongst analysts locally is that he’ll focus more on the negatives for the economy as the positives would presumably allow him to sleep soundly!<br> <br> With the US Dollar in a broad-based sell-off after the FOMC, USD/CAD opens at 1.2795 with AUD/CAD at a 6-week high of 0.9775.

Euro

AUD / EUR

Expected Range

In a pre-FOMC session in which the dollar generally struggled after the core CPI numbers, the euro found it difficult to capitalise. In part this is due to renewed uncertainties around Italian politics and Press reports locally that President Sergio Mattarella will dissolve Parliament this month and set a March 4 election date. Under the Italian Constitution, the vote has to be held before May 20th. <br> <br> Paolo Gentiloni on Monday celebrated his one-year anniversary as Italy's Prime Minister, an office he took after Matteo Renzi resigned following a humiliating defeat in a national referendum. A new electoral law known as “Rosatellum” had to be passed in October because Italy’s two houses of Parliament had different election systems. Under the Rosatellum law, there will only be a clear-cut winner if one party or bloc receives over 40 percent of the vote. <br> <br> Recent opinion polls show a centre-right coalition ahead, followed by the Five Star Movement and Gentiloni's Democratic Party, but all of them several points away from the 40% bar. Given this uncertainty, 10-year Italian bond yields yesterday jumped 10bp. Although there was no contagion into other peripheral Eurozone bonds, investors haven’t recently needed much of an excuse to sell EUR and the Italian news was the trigger for its latest underperformance.<br> <br> Away from the serious but sometimes very tedious business of politics, there’s an ECB Council Meeting at lunchtime on Thursday at which new staff economic projections will be unveiled. With Eurozone monetary policy likely to be on hold for a very long time, the main interest amongst analysts is the colour of Draghi’s tie. Yes, honestly!! If we look back over the last three years, there have been 5 announcements on QE. On four of these he wore a blue tie, the first three being the same blue tie he wore when he famously vowed to do “whatever it takes” to save the euro”. October was a light purple. Since January 2015, he has never announced a policy easing whilst wearing a red tie. So, if you’re at your screens for 2.30pm Frankfurt time, watch to see how EUR/USD reacts as he walks into the Press Conference…<br> <br> With the FOMC Press Conference now behind us, EUR/USD opens in Asia at 1.1818 with AUD/EUR at 0.7635.

New Zealand Dollar

AUD / NZD

Expected Range

The Kiwi Dollar had held on to a US 69 cents big figure ever since 01.00am New York time on Monday morning and reached a 3½ week high of 0.6995 even before last night’s Fed Statement. After Janet Yellen’s final FOMC Press Conference, the US Dollar suffered a sharp and broadly-based sell-off. NZD reached US 70 cents for the first time since October 19th and opens in Asia around USD0.7020.<br> <br> Yesterday in New Zealand, the latest data on food prices matched the consensus of analysts’ forecasts, falling -0.4% m/m in November. Lovers of economic data always have plenty to feast on from NZ’s official statisticians. We learned that lower fruit and vegetable prices were driven by a 6.5% fall for vegetables. Tomatoes, broccoli, and lettuce led this fall. Fruit prices rose 3.7%, driven by higher prices for nectarines and apples, slightly offset by lower strawberry prices. Elsewhere, and as shoppers around the world will be painfully aware, annual butter prices increased 48% to reach another record high. The average price of the cheapest available 500 gram block was $5.74 in November 2017, compared with just $3.88 a year ago. <br> <br> Let’s see if the official number-crunchers can make today’s data on agricultural production and Friday’s vehicle registrations just as interesting…

United States Dollar

AUD / USD

Expected Range

After seven days without a fall (six up and one unchanged) the USD was arguably ripe for a bit of a correction ahead of last night’s FOMC Statement and Press Conference. Having touched 93.81 on Tuesday, its index against a basket of currencies was already slipping back as the CPI figures were released. Headline CPI came in as expected at 2.2% y/y but the core ex-food and energy number fell to 1.7%.<br> <br> Fully three-quarters of the increase in the all-items CPI from 2.0% to 2.2% was due to energy prices whilst car insurance, new and used vehicle prices also increased. The core measure excludes these items and was depressed further by a 1.3% m/m drop in apparel; the biggest monthly decline since September 1998. Immediately prior to the Fed announcement, the USD index was down almost 0.4% from Tuesday’s high at 93.46.<br> <br> The Fed Statement noted, “the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong.” In its new economic projections, it revised up 2018 GDP forecasts from 2.1% to 2.5% with further more modest upgrades to the outlook in 2019 and 2020.

By Nick Parsons

USD rises for 6th day out of last 7 as stocks make fresh all-time highs. AUD finally catches a bid, NZD pauses, GBP and EUR soft again.


Australian Dollar

AUD

Expected Range

Although the Aussie couldn’t hold on to its best levels against a very strong US Dollar, Tuesday was actually a pretty good day. It held its ground against the buoyant NZD and finished up against every major currency we track here with its biggest percentage gains versus the EUR (+0.7%) CAD and GBP (both +0.5%). Sometimes it helps to be lucky and we’ll humbly thank serendipity for the fact that AUD/USD peaked at 0.7576 after we’d pointed out here 24 hours ago that the first level of technical resistance on the chart came at 0.7577… <br><br> Tuesday’s NAB Survey can take some of the credit for the AUD rally, for behind the headlines on Business Confidence and Conditions, there was stable employment (+7) and the fact that most measures of activity and confidence are still above their longer-term averages. More importantly perhaps, is the fact that offshore traders who have seen the NZD soar don’t want to be caught facing the same way with excessively short positions in the AUD ahead of Thursday’s Australian labour market report. Everyone makes mistakes but the secret is to try to learn from them, not replicate them. <br><br> The diary for Wednesday shows a couple of RBA speakers: Governor Phil Lowe is first up with a speech at the Australian Payments Summit in Sydney but with perhaps more meat for the markets, Deputy Governor Christopher Kent is talking at a Finance and Business Conference on “The availability of business finance”. <br><br> Looking forward to Thursday, consensus estimates are for a +15k increase in employment with the jobless rate steady at 5.4%. Unlike many countries elsewhere in the world, Australia doesn’t produce monthly earnings data alongside the labour report; instead the wage price indices are available only quarterly and we’ll have to wait until February for the latest updates. <br><br> For today, AUD/USD opens in Sydney around USD0.7555; a quarter of a cent below its best level in New York but still a net 20 pips up on the day against a very strong US Dollar. AUD/NZD, meantime, begins at 1.0900; up almost 40 pips from Tuesday morning’s low.

British Pound

GBP / AUD

Expected Range

Tuesday morning’s British newspapers for once weren’t dominated by Brexit but as we wrote in our London morning commentary, “this may well be only a temporary reprieve, both politically and for the currency”.<br><br> For six days, UK MP’s have been debating the Brexit Bill; what is known as the Committee Stage. The trickiest votes have been scheduled for tomorrow and for next Wednesday. Though the Government has either backed down with concessions or narrowly won all of the procedural stuff so far, there is a proposal by the former Attorney General that would require the Prime Minister to write the terms of her Brexit deal into a law that would have to be passed by Parliament. This could well be the moment for a more serious rebellion than the votes thus far which have been on the scale of what colour paperclips to use.<br><br> Amidst the relative Brexit calm, Tuesday brought the November CPI numbers. We had thought that higher petrol prices might outweigh Black Friday discounting and luckily this is exactly how it turned out. CPI printed at 3.1% y/y which will require the Governor of the Bank of England to write a letter of explanation to the Chancellor; the central banking equivalent of being made to sit on the naughty step.<br><br> There is little realistic chance of a near-term rise in UK interest rates so the focus is on the squeeze in real earnings which is worsening as the holiday season begins. UK wages have grown by less than prices for almost the whole of 2017 and there’s no sign yet the squeeze is easing. It’s a very cold and bleak pre-Christmas period.<br><br> The GBP fell 80 pips against both the AUD and NZD on Tuesday. GBP/USD did its usual 50 pip intra-day high-low swing on the CPI release and then slid back to the day’s lows in New York. It opens in Asia this morning at USD1.3310 with GBP/AUD at 1.7605.

Canadian Dollar

AUD / CAD

Expected Range

The Canadian Dollar had a day of two halves on Tuesday, tracking oil prices both up and down. The early news was that the North Sea Forties Pipeline System – which carries 400,000 barrels per day of oil to Scotland – is being closed for repairs after the discovery of a serious crack whose repair will likely take weeks rather than days. Fortunately (for production rather than prices) the damage is on an onshore section of the pipeline which will be much easier to repair than if it had been underwater but it is still a major disruption to supply. <br><br> NYMEX crude (not a perfect substitute for Brent but still highly correlated to it) jumped 50 cents to a high of $58.55 but then plunged a dollar-fifty in the North American session to $57.20. USD/CAD had moved down from 1.2855 at Tuesday’s Sydney open to 1.2820 at the New York open before the combination of a generally very strong US Dollar and a weaker energy complex (natural gas plummeted 4.2%) lifted USD/CAD by around 60 pips in New York. <br><br> The rest of the week is pretty light in terms of economic data with just new house prices on Thursday and the monthly survey of manufacturing on Friday. Bank of Governor Stephen Poloz has a fascinatingly titled speech “Issues keeping me awake at night” on Thursday lunchtime in Toronto which is presumably not about his list to Father Christmas…

Euro

AUD / EUR

Expected Range

Apart from a brief rally around the release of the ZEW Survey (see below) it was downhill all the way for the EUR on Tuesday. Yet again, it fell against every major currency with its biggest losses against the AUD and NZD (-0.5%) but down -0.4% against the USD and 0.1% against the GBP. Looking at individual pairs, EUR/USD fell to a low of 1.1720; matching its lowest point in 3-weeks whilst AUD/EUR rose 40 pips to 0.6440 and NZD/EUR was up 35 pips at 0.5905.<br><br> The latest ZEW survey of professional investors in Germany was not to blame for the EUR’s drop. The headline expectations index dipped to 17.4 in December from 18.7 in November, marginally below the consensus of 18.0. The current situation index rose slightly to 89.3, from 88.8, very slightly above the consensus 88.7. The details showed that both Eurozone and German inflation expectations increased in December, and short-term rate expectations also rose a little. Expectations for the stock market rose across the major Eurozone countries, and investors also anticipate a slightly weaker dollar versus the euro.<br><br> Over the next few days, there’s an ECB Council Meeting at lunchtime on Thursday at which new staff economic projections will be unveiled and we’ll get the ‘flash’ December PMI’s on Thursday morning. For today, European Commission President Juncker and European Council President Tusk are scheduled to brief members of the European Parliament about Brexit negotiations ahead of the EU Economic Summit in Brussels on Friday.

New Zealand Dollar

AUD / NZD

Expected Range

Having finished Monday way out at the top of the FX pile and up against every major currency, the Kiwi Dollar extended its gains even further on Tuesday morning before finally giving back a little of its stellar performance. It still finished the day up against every currency apart from the AUD (against which it was net unchanged at 1.0900 having at one point been to AUD/NZD1.0864) and did best against both the GBP and EUR. <br><br> Why is it, our readers may wonder, that the appointment of just one person to the Central Bank might have such a disproportionate impact on the FX market? There are two parts to the answer: firstly, we always have to take investor positioning into account. After the September 23rd General Election in New Zealand, there were worries about the overall direction of economic policy, the attitude towards inward capital flows into the residential property market and a change in the Central Bank’s inflation fighting mandate. Investors were generally short of NZD, either outright or relative to neutral benchmark weights. Such positions are always vulnerable to a squeeze on unexpected positive news flow. Secondly, New Zealand doesn’t have a monetary policy committee with separate votes for each member. As the RBNZ notes on its own website, “At the Reserve Bank of New Zealand responsibility and accountability for monetary policy rests on one individual − the Governor of the Reserve Bank”. If he or she wants to change interest rates, they are changed. It’s as simple as that. <br><br> After giving back some – but by no means all – of Tuesday’s gains, the Kiwi Dollar opens in Asia this morning at USD0.6935 whilst GBP/NZD at 1.9190, is a more than 5 cents below last Thursday’s highs up around 1.9760.

United States Dollar

AUD / USD

Expected Range

The USD is on a real hot streak at the moment, rising for a 6th day out of seven on Tuesday to take its index against a basket of major currencies up to a high of 93.81; its best level since November 14th. <br><br> US equity markets reached all-time closing highs on Monday and then before Tuesday’s opening bell on Wall Street, futures markets made new all-time intra day highs, keeping up a stream of positive headlines right into the close. Not even the President could contain his excitement, tweeting, “Consumer Confidence is at an All-Time High, along with a Record High Stock Market. Unemployment is at a 17 year low. MAKE AMERICA GREAT AGAIN! Working to pass MASSIVE TAX CUTS (looking good)”. <br><br> The Fed ends its two-day FOMC meeting today and it is a near-certainty that rates will be raised 25bp. The only reason that some of the online calculators show an 88% probability of a 25bp hike is that the residual 12% reflects a 1-in-8 chance of a 50bp move. Now that would be a shock! <br><br> On the US economic calendar this week, CPI is released Wednesday, Thursday brings retail sales and Friday is industrial production. If the stock market can withstand higher rates and a new set of interest rate projections for 2018, the US Dollar ought to continue to find some support, at least until all the short positions have been squeezed out…

By Nick Parsons

NZD surges after new RBNZ Governor announced. USD steady, GBP lower after more Brexit confusion, AUD awaits NAB Survey


Australian Dollar

AUD

Expected Range

The Australian Dollar had a decent day on Monday in the Northern Hemisphere. Having stabilised in the low 75’s against the US Dollar Friday afternoon, it traded better right from the off and once it broke through Friday’s 0.7528 high, an improving technical picture helped lift the pair up to a best level in New York of 0.7542.<br> <br> Though it is in technically somewhat better shape, the Aussie still needs some better fundamental news if it is to build on yesterday’s gains. With the Reserve Bank of Australia clearly in no rush whatsoever to tighten monetary policy (and now not having another Board meeting for almost two months), the incoming economic data in Australia have been disappointing recently. Last week saw GDP and trade data fall shy of analysts’ expectations whilst the previous week saw softness in consumer confidence, wages and house prices. <br> <br> This morning brings the widely watched NAB Business Survey. In October, Business Conditions jumped fully 7 points to +21; the highest level since the Survey began almost 20 years ago. The puzzle a month ago was that Business Confidence was unchanged at +8; only barely above its long-term average. The way in which this divergence is unwound will hold the key to the Aussie Dollar’s immediate future: will conditions ease or confidence jump?<br> <br> England cricket fans travelling to the WACA in Perth for the third Ashes Test would have done well (and certainly better than their team…) if they’d converted their GBP into AUD last Friday morning. At that point, GBP/AUD was trading at 1.7990 compared to just 1.7720 at last night’s London close. It won’t make a huge difference to the price of those consolation beers but every little helps in a crisis!<br> <br> For today, AUD/USD opens in in Sydney around 0.7530. The two notable technical levels to watch are the 20-day moving average at 0.7577 then last Tuesday’s RBA high of 0.7650.

British Pound

GBP / AUD

Expected Range

As we had suspected it might, the British Pound had a poor day on Monday falling against all the major currencies we track here.<br> <br> Over the weekend, the Minister for Exiting the European Union, David Davis, had described the Irish border agreement as a “statement of intent” which was not legally enforceable, suggesting that the government could walk away from the deal. He also said that Britain would not pay a divorce bill without securing a trade deal with the EU in return; in contrast to the chancellor who said last week it was “inconceivable” that Britain would fail to honour its international obligations. Mr. Davis said of the bill, “It is conditional on getting an implementation period. Conditional on a trade outcome. No deal means that we won’t be paying the money.”<br> <br> Investors are struggling to know what weight to ascribe to policy announcements which seem to be made up, announced, then quickly rescinded. Indeed, only yesterday morning, the Brexit Secretary was forced to issue ‘clarification’ of his comments; none of which left observers any wiser but reinforced the notion of a policy vacuum at the heart of Government. As the week progresses, there’s a busier economic data calendar than we’ve seen recently. Average earnings and retail sales are all due before Thursday’s BoE MPC meeting whilst today brings the November CPI figures. If consensus expectations of an annual inflation rate of 3.0% prove correct, the Governor of the Bank of England will narrowly avoid having to write a letter of explanation to the Chancellor. If it is above 3% (and our own back of the envelope projections suggest higher petrol prices might outweigh Black Friday discounting) then the UK Press will also be full of stories about a worsening squeeze on real incomes. <br> <br> After Monday’s slide, the GBP opens in Asia this morning at USD1.3345 with GBP/AUD at 1.7720.

Canadian Dollar

AUD / CAD

Expected Range

The Canadian Dollar was pretty much sidelined throughout Monday, after a week in which it reversed all its prior strength after the really good employment report on the very first day of the month. Last Tuesday morning it reached a best level of USD1.2644 as investors anticipated the possibility of a hawkish surprise from Wednesday’s Bank of Canada policy meeting. This did not materialize. Instead, BoC noted that, “While higher interest rates will likely be required over time, the Governing Council will continue to be cautious, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation”. <br> <br> USD/CAD jumped up to 1.2800 almost immediately and by the New York close on Friday it was up at 1.2850; pretty much exactly where it was just before the jobless report. For the whole of the last 24 hours, USD/CAD has been trapped in a very narrow 30 pip range from 1.2834 to 1.2864 even though crude oil rallied more than half a cent during the New York session to take MYMEX up from $57.20 to $57.86.<br> <br> The week ahead is pretty light in terms of economic data with just new house prices on Thursday and the monthly survey of manufacturing on Friday. Bank of Governor Stephen Poloz has a fascinatingly titled speech “Issues keeping me awake at night” on Thursday lunchtime in Toronto.

Euro

AUD / EUR

Expected Range

The euro’s low last week came right at the open of North American trade on Friday morning when it hit USD1.1735 before rallying 40 pips or so into the New York close at USD1.1775. On Monday in the Northern Hemisphere it extended gains up to 1.1801 but couldn’t sustain a 1.18 big figure to the end of the day, finishing at USD1.1790 and AUD/EUR0.6390.<br> <br> There was some talk at the weekend that the euro’s poor performance might have been linked to the European banking sectors’ seasonal demand for USD financing ahead of year-end; a phenomenon which has seen the cross-currency basis swap move sharply lower (USD more expensive to borrow) in each of the last two calendar years and which seems to be repeating again in 2017. The very last working day of 2016 proved to be especially painful for many international bank funding desks and there may be a willingness to pay up early for year-end money rather than suffer the extreme and very expensive volatility of end-Dec 2016. If this explains last week’s EUR weakness, however, it still doesn’t solve the puzzle of why the EUR rallied on Monday. It certainly wasn’t due to any incoming Eurozone news.<br> <br> Over the next few days, there’s an ECB Council Meeting at lunchtime on Thursday at which new staff economic projections will be unveiled. Before that, today its Germany’s ZEW survey of professional investors and we’ll get the ‘flash’ December PMI’s on Thursday morning. On Wednesday, European Commission President Juncker and European Council President Tusk are scheduled to brief members of the European Parliament about Brexit negotiations ahead of the EU Economic Summit in Brussels on Friday.

New Zealand Dollar

AUD / NZD

Expected Range

After a very choppy week, the volatility of the NZD continued on Monday and it was way out at the top of the FX pile; up against every major currency. This time at least, after the frustrations of last week, there was some genuine news to explain the move: the appointment of a new Governor of the RBNZ. Finance Minister Grant Robertson announced Adrian Orr – a well-respected and highly experienced professional economist, former head of financial stability at the RBNZ and currently head of the NZ Superannuation Fund - will take up the post in the New Year.<br> <br> The new Labour-led government in New Zealand wants to add full employment to the bank’s inflation-fighting mandate and change its governance structure, including the appointment of outside experts to its policy committee. The appointment of a classically-trained insider to be the new Governor will help calm investor fears about a too-radical shift of direction which have weighed on the NZD since the election on September 23rd.<br> <br> Monday’s price action for the Kiwi Dollar was little short of spectacular: NZD/EUR rallied 55 pips, NZD/USD was up 80 pips, NZD/CAD rose 100 whilst GBP/NZD plunged more than 2 ½ cents. The NZD opens in Asia this morning at USD0.6915 with GBP/NZD down 5 cents from last Thursday’s high at 1.9290.

United States Dollar

AUD / USD

Expected Range

After last week’s 5-day winning streak, the USD gave back some of its gains on Monday. This was largely because a 20 pip rise in the EUR/USD exchange rate outweighed a 20 pip fall in GBP/USD. If we look in detail at the US Dollar’s narrow trade-weighted index against a basket of currencies, the EUR has a 57% weight. The Japanese Yen has a 14% weight, GBP 12%, CAD 9%, with the Swedish Krone and Swiss Franc both at 4%.<br> <br> The Fed begins its two-day FOMC meeting today and it is a near-certainty that rates will be raised 25bp. First up on this week’s US economic data calendar was the so-called “JOLTS” report out yesterday; the Job Opening and Labour Turnover Survey. This is often said to be one of Fed Chair Janet Yellen’s favourite indicators of labour market activity though it hasn’t gotten much traction with currency or interest rate analysts. For the record, the total number of job openings dropped from 6.177m to 5.996m, well below the 6.135m estimate; the biggest monthly drop and the lowest job openings number since May.<br> <br> The NFIB Survey of small business optimism comes later today, CPI is released Wednesday, Thursday brings retail sales and Friday is industrial production. If the stock market can withstand higher rates and a new set of interest rate projections for 2018 (the S+P 500 index managed another 5-point gain yesterday), the US Dollar ought to find some support though we wouldn’t rule out a move down to 93.00 in the meantime.

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