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AUD / USD
0.7310 – 0.7490
The Australian Dollar opened yesterday well above 74c however, poor data locally and a batch of strong US data left the Aussie to fall sharply overnight having ran out of steam at 0.7490. Locally, Australia reported that Building Approvals had plunged across all key markets, a decline of 12.6% being the third consecutive decline, compared to an expected gain of 2%. Meanwhile, in the United States ADP jobs report showed a jump in the number of employed in November which was well above consensus and the increase points to further steady growth in employment and a tightening in the labour market. Choppy sessions are likely in anticipation of the of the Federal Reserve meeting in two-weeks, the Aussie open this morning at 0.7382.
Great British Pound
GBP / AUD
1.6850 – 1.7000
The Great British Pound initially saw a dip to an intraday low of 1.2420 as The Bank of England released its Financial Stability report. The bank warned of challenging times ahead with further risks to the UK following the Brexit vote and one of the major UK Banks – RBS failing the BOE stress test. Consumer confidence figures also waned dropping five points as the uncertainty about the state of the current economy continues to weigh on investor minds. Cable saw some support rallying back through 1.25 on early morning trading as Oil prices rallied over 10% as an agreement was finally reached for OPEC to cut supply. Sterling opens this morning at 1.2510 against the US Dollar and is higher against the Australian Dollar 1.6930 and Kiwi 1.7650.
USD, EUR, JPY
The US Dollar Index which measures the Green' strength increased 0.50% on the back various US economic data. ADP job numbers released showed a rise of 216k employed in November and well above forecasts of 147k, in addition to this Personal Spending increased slightly but still below expectations whilst Personal Income rose. Meanwhile, the Core PCE Price Index rose at an annualised rate of 1.7% in October, this is the Fed' preferred measure for inflation and uses the data to help determine interest rate decisions with the aim of keeping inflation at a rate of 2% or below. Chicago PMI gained in November from the previous month close to two-year highs, the data suggests there' confidence in the manufacturing sector post the US election. In other news, Japanese industrial production rose 0.1%, beating a 0.1% fall seen month-on-month in October, suggesting it is on track to expand for the whole of Q4, USD/JPY buys 114.44 at the time of writing being eight-month highs. Over in Europe, inflation came in a touch stronger than expected at 0.6% in November whilst core inflation was in line with expectations, whilst in Germany the number of employed declined in November. The EUR remains under pressure ahead of Italy' upcoming constitutional referendum on December 4<sup>th</sup>.
New Zealand Dollar
NZD / USD
0.7050 – 0.7150
The New Zealand Dollar continued its rally to reach a three-week high of 0.7170 against the US Dollar. Gains were then reversed in overnight trading as the US Dollar strengthened against a majority of its peers with higher yields and a stronger than expected ADP Nonfarm employment report. In RBNZ Governor Glenn Wheelersspeech yesterday he advised of significant risk of further house price increases and high dairy farm debt despite a sound financial system as the RBNZ puts the Government on watch. The NZD/USD cross shaved a cent to touch a low of 0.7070 in early market movements as the case strengthened for a Federal Reserve interest rate hike this month. Domestic overseas trade figures are out this morning as the Kiwi dollar opens this morning at 70.85 US Cents.
0.7380 - 0.7520
The Australian dollar paused for a break yesterday having rallied the week prior following an increase in commodity prices. The local unit traded between 0.7435 and 0.7490, a near-term resistance level. Private New Home Sales fell 8.5% in October according to the Housing Industry Association, this was the lowest level of sales since July 2014 but down on 4.9% this time last year. The data did very little to the currency and so the Aussie took most of its direction from offshore data released from the worlds largest economy. Third-quarter GDP data reported a strong reading alongside U.S Consumer Confidence Index reporting a rise this month versus the previous month. The upbeat data does add optimism over the outlook for the U.S economy and for the Federal Reserve to move next month on an interest rate hike. The Aussie has fared well elsewhere, rising against the JPY to stay near a 7-month high whilst political risk have kept AUD/EUR in check. Today we see the release of Building Approvals and Private Sector Credit.
1.6500 - 1.6800
During Tuesday' session, the Great British Pound continued to clawed back some recent gains on the USD. The GBP / USD cross traded to a high of 1.2525.Momentum remains positive for GBP. We expect support to hold on moves approaching 1.2304 while any upward push will likely meet resistance around 1.2675. The pair is currently trading at 1.2490. A quiet session expected locally with little to no economic data due. All attention will be on Thursday' Manufacturing PMI in November which is forecast to rise to 54.5 from 54.3 previously. Construction PMI, out on Friday, is forecast to fall to 52.3 from 52.6 previously.
The U.S Dollar enjoyed mixed fortunes through trade on Tuesday advancing early before relinquishing gains into the daily close. Stronger than anticipated preliminary third quarter GDP numbers and an uptick in Consumer confidence helped bolster demand for the world' base currency and pushed the USD through 113 JPY while the Euro fell back through 1.06. As the Greenback approached fresh highs the rally began to run out of steam and investors appeared to take the opportunity to consolidate profits and correct positions ahead of a busy and risk filled December. Falling back below 112.50 JPY the USD largely gave up its earlier gains while the Euro rallied through intraday highs to touch 1.0650 at time of writing. With attentions now turned to prelim non-farm payroll numbers and a raft of European macroeconomic drivers investors will be keenly attuned to fluctuations in sentiment. The current trend suggests the recent USD sell off is no more than a consolidation of recent rallies and there is still plenty of upside potential, however markets will be wary of extending positions ahead of the Fed' December rate hike and key European referendums and elections.
0.7020 - 0.7220
The New Zealand dollar railed through trade on Tuesday advancing back through 0.71 U.S cents as the steam appears to be running out of the recent USD rally. Having touched 14 year highs last week the Greenback has suffered a consolidated sell off as investors assume profits and correct positions ahead of a risk filled December. With attentions now turning to the Federal Reserve' December monetary policy meeting markets appear reluctant to extend the recent rally and look to be consolidating positions rather than chasing a complete correction. U.S treasury yields remain favourable and demand for the USD is expected to continue through the short to medium term as investors adjust to a Trump presidency and the possibility of redirected capital flows.
0.7355 – 0.7520
The Australian Dollar moved higher during the first day of the trading week touching 0.7493 as investors continued to lock in profits from the Greenbacks recent rally. The local unit has been holding its own against the dollar thanks in part to a rise in prices of commodities such as iron ore, Australia' top export earner. Interesting times ahead for the pair as the US Federal Reserve are expected to raise interest rates next month, this in recent weeks has supported the Dollar along with expectations of increased fiscal spending and tax cuts under the Trump administration will spur economic growth. Meanwhile, AUD/EUR holding strong above 70c amid concerns over an upcoming referendum in Italy. On the data front, quiet again locally, the Aussie will look offshore at the US as it releases its revised data on third quarter GDP and Consumer Confidence report.
1.6550 – 1.6850
Despite wider USD weakness and a general correction against recent greenback gains the Great British Pound edged lower through trade on Monday. Sterling followed the USD downward as investors sold down GBP holdings on comments from BoE policy makers Gertjan Vlieghe wherein he suggested the Bank would introduce prolonged stimulus measures. The MPC member is an advocate for a sustained period of looser monetary policy suggesting that by hiking rates to soon the Bank would leave the door open to a rapid rise in unemployment and a contraction in economic growth. Plunging through 1.24 and touching intraday lows at 1.2388 Sterling recovered some of the day' losses moving back through 1.24 and currently buys 1.2409 as attentions turn to Wednesday' banks stress test for domestic direction while U.S GDP numbers dominate early week direction.
With the S&P 500 having notched up its seventh record close on Friday since the US Presidential election on Nov 8, US Stocks fell modestly on Monday as financial and consumer discretionary sectors lead the sell-off. As investors transition into the week, volumes and liquidity have remained muted in the aftermath of last week' holiday interpreted trading window with some key event risks on the horizon also helping to explain the calmer waters. Ahead of Friday' non-farm payrolls report which represents the last labour market snapshot scheduled before the Federal Reserve meets in December, attention is also rightly set to shift back to Europe with market participants now waiting on the Italian constitutional referendum on Sunday ahead of several speeches expected from ECB President Mario Draghi over the coming days. Opening marginally lower this morning the US dollar is softer versus the Japanese (112.101) whilst steady versus the Euro (1.0607).
The New Zealand Dollar advanced against the US Dollar on Monday having opened at 0.7038 to touch a high of 0.7102 overnight as overall Greenback weakness played amongst the FX markets. The Kiwi has been one of the strongest currencies over the past few days, surpassing even the U.S dollar and has been bought quite strongly however, still finding 71c a tough resistance to crack with interim support sitting at 0.7035. Data is light out of New Zealand this week, ANZ business confidence due tomorrow as well as the RBNZ' semi-annual Financial Stability Report.
0.7345 – 0.7520
Last week the Australian Dollar closed the week higher when valued against its US counterpart as investors took profits following Greenback strength in recent weeks. Having opened on Friday at 0.7408 following a quiet session the day prior due to the US Thanksgiving holiday, the Aussie remained above what has been seen to be a key resistance level of 74c throughout the trading day and opening this morning at 0.7449. However, the local unit will likely remain under pressure with the US Federal Reserve expected to raise rate next month. The FedWatch Tool is showing a 93.5% probability of an interest rate hike between 50-75 basis points. A quiet session expected locally with little to no economic data due, the European Central Bank President Mario Draghi is due to testify about the ECB' outlook and possible consequences of Brexit to the Economic Committee, AUD/EUR holding above 70c euro cents for now.
1.6650 – 1.6850
The Great British Pound offered little through trade on Friday edging marginally higher touching 1.2480. Sterling held steady as 3<sup>rd</sup> quarter GDP estimates remained steadfast defying expectations the economy would struggle in a post Brexit environment. When combined with a marginal decline in U.S bond yields Cable ticked higher. The Pound has remained stubbornly stable in the face of recent USD gains and Sterling appears range bound struggling to break a 3 week cycle bouncing between 1.23 and 1.26. Attentions turn to this week' Bank Stress Tests for domestic direction while U.S bond yields and Greenback demand continue to govern wider directional flows.
The U.S Dollars upward assault stalled on Friday as the worlds base currency moved marginally lower against most major counterparts. Limited volumes and thin trading in combination with a fall in U.S bond yields saw investors sell down USD holdings, taking profits and consolidating recent gains. The Greenback moved lower touching intraday lows at 112.72 against the Japanese Yen while the Euro advanced through 1.06 to touch session highs at 1.0611. The selloff has some investors questioning whether we have reached the peak in the US dollars’ recent upward push but the size of the pullback was small when considered against the scope of wider gains and there is still plenty of room for the USD to stretch its legs. Wider market sentiment suggests there is still an overwhelming demand to buy USD as fiscally driven growth and inflation lead monetary policy tightening are forcing bond yields higher and widening the gap between emerging market and established central bank' monetary policies. Attentions today will remain with yield prices and emerging markets central bank commentary ahead of Preliminary U.S GDP numbers Wednesday and Friday' Non-Farm Payroll report.
0.6970 – 0.7050
The New Zealand dollar traded last week in a fairy tight range managing to keep its head above the 70.00 cent mark against the US Dollar. NZ Trade balance figures were better than expected as dairy products led to a rise in total exports for October. Despite hitting a low of 0.6980 the Kiwi remains resilient holding above critical support levels and opens at 0.7040 this morning. The Kiwi takes its cues from the RBNZ Financial Stability Report on Wednesday along with RBNZ Governor Graeme Wheeler appearing in parliament and could take the opportunity to discuss future monetary policy decision.
0.7360 – 0.7440
The Australian dollar has tracked a familiar course over the past 24 hours, remaining comfortably within the trading ranges witnessed for all of this week. With the 74 US Cents mark clearly representing a fresh level of resistance for the domestic unit, a US Public Holiday kept overseas investors at bay overnight as the Greenbacks upward trajectory finally showed signs of slowing. Having surged ahead versus a full spectrum of the world' top currencies the promise of higher yields from the world' largest economy continues to provide ample motivation for those investors pushing funds back into the United States. In what' likely to be a quiet end to the week the Australian dollar currently buys 74.07 US Cents.
1.6700 – 1.6900
During Thursday' session the Great British Pound clawed back some gains on the USD. The GBP / USD cross traded to a high of 1.2494.With the US market closed for the Thanksgiving holiday all attention was on the BBA Mortgage Approvals which climbed to 40.9 thousand for the month of October, marking a five-month high. Attentions now turn to the Second Estimate GDP for direction and guidance. We expect support to hold on moves approaching 1.2351 while any upward push will likely meet resistance around 1.2479. The pair is currently trading at 1.2446.
The U.S Dollar' rampant rally persisted through trade on Thursday as the worlds base currency continued to extend 14 year highs. With U.S markets closed in observance of Thanks giving liquidity and volumes remained thin yet the Greenback continued its upward push. Advancing through 113 JPY the USD touched intraday highs at 113.50 while the Euro struggled to break back above 1.0580. The proposed fiscally driven growth, tax concessions and benefits for repatriation of corporate dollars are driving expectations for an uptick in inflation, possibly forcing the Federal Reserve to pick up the pace of interest rate hikes and encouraging an inflow of capital as investors chase a higher yield. The extent of the dollars unrelenting surge is extending into emerging markets with central banks forced to consider interventionist methods less their currency markets collapse as bearish bets increase to their highest level in months. With volumes expected to remain thin through the end of the week and little of note on the macroeconomic docket attentions now turn to next week' GDP print and Non-Farm payroll numbers.
A lack of economic data and illiquid markets due to the Thanksgiving holiday has seen the New Zealand dollar drift slightly lower in overnight trading. Starting the day yesterday at the 70.00 cent mark against its US counterpart, the Kiwi touched an overnight low of 0.6970 to test July 22<sup>nd</sup> lows this year. Further direction today will be driven locally by Trade Balance figures with forecasts of a narrowing deficit to occur. The Kiwi has bounced back this morning and is testing the 70.00 cent mark on open.
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