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AUD / USD
0.7420 – 0.7500
During a session dictated by political drama, investors have surprisingly been able to maintain their cool with overseas equity markets rising slightly as did both crude oil and base metals. Tracking back towards near-term resistance close to the 75 US Cents mark, policy makers are largely expected to keep the official cash rate unchanged at its record low of 1.5 percent this afternoon ahead of other key announcements which come in the form of a quarterly GDP print tomorrow. Opening this morning in a marginally stronger position at a rate of 0.7469, any positive rhetoric supported by perceptions that Australia' yield curve has bottomed out could spur some further buying interest in the domestic unit.
Great British Pound
GBP / AUD
1.6925 – 1.7225
The Great British Pound continued to higher through trade on Monday punching through 1.27 and touching intraday highs at 1.2748. Sterling was the benefactor of a strong uptick across the services sector and wider USD weakness as investors continue to amend positions and pull up the recent USD rally having broken key technical resistance handles. UK Services grew at its fastest pace in the last 10 months through November and compliments a string or recently upbeat macroeconomic indicators. Having moved beyond the 100 day moving pound fortunes continue to hang on post Brexit fall out with attentions today turning to the ongoing legal battle to determine when Prime Minister May and the Government can invoke Article 50 and initiate the UK' exit from the European Union.
USD, EUR, JPY
The U.S dollar moved lower through trade on Monday as investors forced the Euro higher following an Italian referendum on constitutional reform and continued to adjust USD holdings having overshot technical resistance handles. The 19 nation shared unit bounced of 18 month lows and touched intraday highs at 1.0796 when Prime Minister Renzi' plan to rein in the powers of the Senate was resoundingly defeated in a national referendum. Despite moving lower in early trade as investors feared a “No” vote would leave the door open to anti euro campaigners and an early election markets had largely anticipated the result and as initial concerns abated the Euro rallied strongly. Analysts adjusted expectations assuming a caretaker government will step in to take Italy through to its 2018 election and provide some respite to those pushing to leave the Eurozone. The result and subsequent resignation of the Italian Prime Minister creates further uncertainty and amplifies concerns for a an increasing nationalist push and move away from a common currency which could force a Euro sell off as the single unit comes under threat in 2017 ahead of key elections across Europe. Attentions today turn to a quiet macroeconomic docket with direction likely to be governed by sentiment flows and continues positional adjustments.
New Zealand Dollar
NZD / USD
0.7080 – 0.7180
Initially dropping to an intraday low of 0.7069 when valued against its US Counterpart yesterday, the New Zealand dollar appeared to be on shaky ground following the surprise resignation of Prime Minister John Key. Triggering an early move back into the world' reserve currency, the short-term jolt proved to be a relatively short lived one with the Kiwi recovering as overseas investors entered the mix. Opening in a steadier environment this morning at a rate of 0.7137 the Kiwi' biggest hurdle today is likely to come in the form of tonight' Global Dairy Trade Auction which is expected to deliver another increase in milk powder prices.
0.7410 - 0.7480
Starting the new week in a stronger position when valued against its US Counterpart the Australian dollar has benefited over the course of the past five days from a Greenback which has struggled to recapture its peak. Having traded to its highest point in 14 years, the domestic unit traded as high as 0.7468 on Friday that is despite a US Labour market report which showed a steady improvement in overall hiring conditions during the month of November. Instead being greeted with a session which hinted towards consolidation instead of a push towards fresh highs, the week ahead remains an important one for the Australian dollar with the Reserve Bank set to meet tomorrow, announcing their latest interest rate decision. Opening in a surprisingly strong position versus the US dollar at a rate of 0.7448, today' thin looking economic calendar will change ahead of an otherwise busy looking week.
1.6875 – 1.7275
The Great British Pound edged higher through trade on Friday closing the week strongly and breaking back through 1.27. An uptick in construction data added to a recent string of positive residential data activity and suggests a modicum of stability across macroeconomic numbers. The UK economy has surpassed post Brexit expectations to date and maintained a relatively tight trading range advancing against the Greenback throughout the last month where all other major counterparts have relinquished gains. Profiting from a softer than anticipated wage growth and stable employment gains Sterling touched one month highs at 1.2733. Attentions now turn to Manufacturing Production data Wednesday as the headline docket item through the week ahead.
The U.S Dollar moved lower against a basket of currency through trade on Friday following a softer than anticipated non-farm payroll print. Despite a decline in the underlying unemployment rate, a moderate uptick in newly created jobs and a dip in wage growth were enough to foster uncertainties surrounding the pace of future Fed rate adjustments. The market has largely priced in an interest rate hike next week and is now searching both macroeconomic data and Fed commentary for guidance and signals that may alter the pace of future monetary policy adjustments. A key driver of recent USD gains has been increased expectations Trumps proposed policies will drive domestic growth and inflation and force the Fed to quicken the pace of subsequent policy changes. The Greenback fell back through 113.50 JPY while the Euro edged back toward weekly highs near 1.0675 before confronted by selling pressures on approach to 1.07. Despite posting its first weekly decline in the past 4 weeks many analysts anticipate a second upward push and are simply attributing last week' correction to short term profit taking and repositioning ahead of the Fed rate announcement. Attentions now turn to services data across both the U.S and much of the Eurozone for direction through trade on Monday.
0.7080 – 0.7160
Trading between a low of 0.7085 and a high of 0.7148 the New Zealand dollar did well to advance versus the Greenback during the back end of last week. Following a multi-week rally for the worlds reserve currency, the move higher which has been triggered off the back of expectations of fiscal stimulus is finally starting to show signs of being fundamentally stretched. Still lying very much at the mercy of broader US dollar moves the Kiwi' first real challenge will come on Wednesday with RBNZ Governor Graeme Wheeler testifying before The Financial Select Committee in Wellington. Opening in a stronger position the Kiwi currently buys 71.26 US Cents.
0.7320 – 0.7490
Figures released by the ABS yesterday showed a slide in Private Capital Expenditure by 4% for the third quarter. Reduced investment in the mining sector had played a part in the decline and sets the tone for a downgrade to the expectations of next week' third quarter GDP figures due out on Wednesday. The Australian Dollar see-sawed through yesterday' day of trade between levels of 0.7361 and 0.7420 and opens this morning a shade higher at 0.7418. In other news, U.S unemployment claims rose more than expected however, the numbers were still under 300k for the week which is an indicator of a firming labour market. Australian Retail Sales due out at 11:30 today for the month of October which are expected to rise 0.3% and later on this evening the widely-anticipated Unemployment figures from the US.
1.6900 – 1.7025
The Great British Pound extended to reach fresh two weeks’ highs when valued against its US Counterpart overnight reaching an eventual peak of 1.2588. Amid signs that a lower Sterling is already starting to stir up domestic price pressures, figures overnight confirmed that growth in manufacturing activity had slowed during November when compared to the past three months. In an end to the week which remains set to be dictated by macro-developments from the United States a reading on construction activity is also likely to garnish consideration attention. Opening stronger versus the US dollar at a rate of 1.2588 the Sterling is stronger across the board notching up gains versus both the Australian dollar (1.6975) and the New Zealand dollar (1.7769).
The sell-off in global bonds extended their rout on Thursday whilst financial shares built on some already impressive gains in the aftermath of President Trumps Victory. Spurred by speculation that the European Central Bank is close to signalling an end to monetary stimulus, lower monetary assistance from Europe, combined with higher rates from the Fed and Fiscal assistance from Trump has well and truly been the driving force behind reflationary trades over the past month. With inflation expectations rising, the sell-off in global bonds hints that Central Banks will be looking to buy sovereign debt at a significantly reduced rate over the near-term. Falling versus the Yen and the Euro in overnight trade the US dollar has lost some ground over the past 24 hours as investors remain eager to see whether Thursday' encouraging private employment report will feed through to a positive non-farm payroll announcement tonight. Sitting front and centre, the world' reserve currency holds the key this evening with the official rate of unemployment set to remain steady at a rate of 4.9 percent.
0.7040 – 0.77120
The New Zealand dollar opens this morning little changed when valued against its US Counterpart at a rate of 0.7084. Having traded to an overnight high of 0.7104 the past 24 hours has been a largely uninspiring trading window for the Kiwi with investors already sitting on their hands ahead of this evening' non-farm payrolls report from the United States. With the Greenback still oscillating at levels just shy of a 16-year high, the Greenback has the potential to further add to those gains should labour market figures confirm that the world' largest economy added in excess of 180 000 new jobs last month.
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.
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.
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>.
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.
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