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BY OFX

Dovish ECB commentary hangs over Euro; Greenback rallies


Australian Dollar

AUD / USD

Expected Range

0.7380 – 0.7500

Absorbing some of the lowest economic growth rates witnessed in close to a decade during the third quarter of this year, the Australian dollar remained well supported for the much of last week when valued against its US Counterpart. Making several attempts to breach well-trodden resistance lines at the 75 US Cents mark, the month long rally which has engulfed global equities since Donald Trump' campaign win has continued to play into the hands of growth and commodity linked currencies that is despite the impressive rise of the US Dollar. Whilst several macro flows from Australia' most important trading partner are likely to have a profound impact on the Australian dollar early this week so too will Thursday' labour market report which remains set to be the domestic highlight. With plenty of water still set to pass under the bridge before the quieter Christmas period the Australian dollar opens marginally higher this morning at a rate of 0.7455.

Great British Pound

GBP / AUD

Expected Range

1.6800 – 1.7000

The Great British Pound edged marginally lower through trade on Friday touching intraday lows at 1.2553. Investors looked to the world' base currency in the wake of the ECB' monetary policy announcement and a subsequent increased demand for U.S equities forcing Sterling toward fresh weekly lows. The move however was somewhat muted as markets appeared wary and refused to extend downward moves ahead of key FOMC and BoE policy announcements later this week. Analysts will be keenly attuned to both central banks as catalysts to force Cable outside its recent range bound trading pattern, with focus squarely on FOMC commentary and GBP macroeconomic indicators as markers to prompt hawkish BoE rhetoric.

Majors

USD, EUR, JPY

Expected Range

N/A

The Euro sell off continued through trade on Friday as investors dour reaction to the ECB' extended quantitative easing program dampened demand for the 19 nation combined unit. Despite lowering the size of its monthly bond purchases the ECB extended acquisitions through December 2017 while leaving scope to raise the size of procurements should it be deemed necessary. The Dovish undertone surprised markets and forced the Euro back through 1.06 touching intraday lows at 1.0528. Investors hurriedly scrambled to adjust positions following the ECB' announcement squaring holdings ahead of the FOMC and Fed' highly anticipated rate announcement. With many analysts pricing in a rate hike this coming Wednesday the gulf between Central Bank policies appears to be widening amplifying demand for U.S treasury yields and adding support to the recent Greenback rally. Attentions this week will be squarely focussed on the FOMC and any hint as to forward monetary policy guidance and the pace of future rate adjustments.

New Zealand Dollar

NZD / USD

Expected Range

0.7050 – 0.7180

Powered by a day on Wall Street which saw US equity markets push towards another fresh high, investors were encouraged late last week by some impressive data prints from the world' largest economy. Off the back of a Sentiment Index from the United States which notched up its highest read since January 2015, flows have and well and truly favoured the basket of currencies more generally associated with pockets deemed riskier in nature. Reaching a high of 0.7223 when valued against its US Counterpart last week, the biggest potential flare up to risk flows this week is likely to come from the US Federal Reserve who are widely tipped to raise interest rates for only the second time since the Global Financial Crisis. Opening marginally weaker the Kiwi currently buys 0.7128 US Cents.

BY OFX

Dovish ECB forces Euro lower


Australian Dollar

AUD / USD

Expected Range

0.7420 – 0.7520

The Australian dollar continued its upward ascendency when valued against its US Counterpart yesterday, breaking through the 75 US Cents mark for the first time in weeks. Whilst struggling to maintain levels up above this critical threshold the past 24 hours have been defined by an upbeat mood across domestic and global equity markets after the S&P 500 posted its best day since the US election. Whilst a roaring iron ore price has also lit a fire under those currencies closely linked to the commodities spectrum, given today' economic calendar is looking thin the Aussie remains set to potentially enjoy a short period of consolidation. Opening stronger versus the Greenback the Australian dollar currently buys 74.57 US Cents.

Great British Pound

GBP / AUD

Expected Range

1.7450 – 1.7650

The Great British Pound suffered a second consecutive daily depreciation through trade on Thursday as investors looked to the USD and US denominated assets following the ECB' surprise QE extension. Despite rallying one percent against the 19 nation shared unit Sterling fell back through 1.26 and touched intraday lows at 1.2552 when valued against the worlds base currency. Cable came under continued pressure following a parliamentary vote backing Prime Minister May' Brexit timetable and proposed March exit disappointing those investors that hoped Brexit may be delayed. Attentions turn now to next week' CPI inflation report and wage growth numbers as key macroeconomic markers governing direction while further Supreme Court commentary surrounding the Governments right to invoke article 50 without parliamentary assent dominates investor focus through the rest of this week.

Majors

USD, EUR, JPY

Expected Range

N/A

policy statement from ECB President Mario Draghi. The European Central Bank surprised markets by extending its bond buying program through 2017 and confirming that reductions to the size of monthly bond purchases are not to be viewed as tapering but merely a means of keeping borrowing costs lower for longer. The announcement keeps the ECB in the market much longer than anticipated and affirms the Bank' commitment to quantitative easing and looser monetary policy. The Euro plunged some 250 points collapsing through 1.08 and 1.07 to touch intraday lows at 1.06 as investors rushed to square positions and buy back into U.S treasury yields. With the Federal Reserve widely expected to raise rates next week yesterday' ECB announcement only serves to highlight the widening gap between central bank policy outlooks. With little of note on today' domestic docket investors will be largely focused on monitoring positions ahead of the FOMC policy announcement chasing any indications of how many rate increases may be proffered throughout next year.

New Zealand Dollar

NZD / USD

Expected Range

0.7120 – 0.7230

Spurred on by improved risk flows, sentiment surrounding the global growth outlook was given a boost overnight after the ECB announced that it would look to taper quantitative easing efforts come next April. Whilst looking to extend its accommodative stance through to the end of this year before winding back, overall confidence levels have been high over the past 24 hours, a position clearly visible given the performance of equity markets. Having traded as high as 0.7223 when valued against its US Counterpart the Kiwi currently buys 71.76 US Cents.

BY OFX

Declining treasury yields force Greenback toward 3 week lows


Australian Dollar

AUD / USD

Expected Range

0.7380 – 0.7500

Contracting by a significant 0.5 percent, economic growth in Australia has come to an abrupt halt during the third quarter of this year. Shrinking by a margin which surpassed even the bleakest of forecasts, yesterday' result is the worst for the domestic economy in almost eight years, representing only the fourth contraction since 1991. Increasing the pressure valve on policy makers to respond the markets initial reaction has been that the RBA will temporary look through the setback, viewing it as a temporary contraction. Dampening demand for the Australian dollar which fell to an intraday low of 0.7416 when valued against its US Counterpart the Aussie opens in a stronger position this morning at rate of 0.7477.

Great British Pound

GBP / AUD

Expected Range

1.6775 – 1.7075

The Great British Pound moved lower through trade on Wednesday relinquishing recent gains and slipping back below 1.2650. Weaker than anticipated Industrial Production data and ongoing Brexit concerns forced investors to take stock of Cable positions obstructing further gains and prompting a short term sell off. With little headline data on hand through trade today Sterling will likely take direction from ongoing Brexit fallout and commentary surround the Supreme Court' approval of parliaments right to initiate article 50 and commence exit negotiations

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S Dollar edged lower through trade on Wednesday relinquishing ground against a basket of major currency counterparts on the back of a contraction in treasury yields. Down a quarter of a percent the dollar index came under pressure as investors square positions ahead of today' ECB policy meeting and next weeks Fed reserve FOMC convention. Markets drove the 19 nation shared unit higher correcting the recent sell off and paring losses on expectations the ECB may adopt a more hawkish or upbeat tone. While President Mario Draghi and the ECB are expected to announce an extension in the current quantitative easing program there is an expectation the Board may proffer a timeline of tapering down bond purchases and a hawkish outlook moving into 2017. The Euro moved back through 1.07 and touched intraday highs at 1.0767 while the Dollar moved lower against the Yen falling through 114 touching intraday lows at 113.44. Attentions now turn to the ECB' policy announcement this afternoon as the primary marker for direction through trade on Thursday.

New Zealand Dollar

NZD / USD

Expected Range

0.7100 – 0.7200

The New Zealand dollar traded within a familiar range when valued against its US Counterpart yesterday supported in most part by positive risk flows as well as a strong session across Asian equity markets. Reaching a 24 hour high of 0.7167 comments from RBNZ Governor Graeme Wheeler in Wellington yesterday only had a minimal impact as did the positive results of an earlier dairy trade auction. Notching up some impressive gains versus its Trans-Tasman rival off the back of figures which showed the Australian economy shrank last quarter, overall moves versus the world' reserve currency have been limited. Opening in a marginally stronger positon the Kiwi currently buys 71.52 US Cents.

BY OFX

Markets shift focus to Eurozone


Australian Dollar

AUD / USD

Expected Range

0.7400 - 0.7500

In a move which had been largely priced in, The Reserve Bank of Australia announced that the official cash rate would remain at a historic low of 1.5 percent for the month of December. Flagging that economic growth is expected to slow during the back end of this year, rate expectations for 2017 remain equally subdued with markets pricing in only a 12 percent chance of one hike over the next 12 months. Having a muted impact on the Australian dollar, the domestic unit has circulated at levels close to the 0.7450 mark for much of the past 24 hours. Opening steady at a rate of 0.7457 when valued against its US Counterpart the majority of today' price activity is likely to be generated from a key GDP indicator where some economists anticipate that the number will reveal an economic contraction during Q3, something which has transpired only three times over the past 25 years.

Great British Pound

GBP / AUD

Expected Range

1.6900 - 1.7100

The Great British Pound touched an intraday high of 1.2775 against the Greenback as the UK Government continued to try and regain control of the Article 50 appeal in the second day of Supreme Court proceedings. Overnight Prime Minister Theresa May has agreed to publish her Brexit plans in a Labour motion which ensures the plan is released before Article 50 is invoked. We saw a stronger US Dollar weaken the GBP/USD cross, testing the 1.27 support level as the US Non-Manufacturing print was favourable as the America' services industries expanded in November at the fastest rate since October last year. The continuation of downside movement to an eventual low of 1.2680 occurred as Bank of England Governor Mark Carney addressed Liverpool John Moores University. He reiterated the challenges facing the UK economy in the wake of Brexit. The release of UK Home prices and Manufacturing production figures will see further direction for the Sterling.

Majors

USD, EUR, JPY

Expected Range

N/A

US Stocks have continued to edge higher in overnight trade whilst asset classes linked to the emerging market space have appreciated amid renewed speculation the European Central Bank will extend its monthly bond purchases. Holding modest gains in a light session, the world' reserve currency has held its ground over the past 24 hours as the euro fell, reaching an eventual low of 1.0698. Void of any tier one data flows there remains a heightened sense of unease hanging over markets at present with the two biggest contributors being both the ECB as well the ongoing elections in Italy. In what' set to be a short-term period defined by a wait and see attitude, outbreaks in price-activity remain a distinct possibility leading into the end of the week. Steady against the Japanese Yen the US Dollar sits at familiar level (114.026).

New Zealand Dollar

NZD / USD

Expected Range

0.7060 - 0.7150

Continuing to show signs that the US Dollars dramatic rise over the past month, has for the time being run its course, a more subdued Greenback this week has allowed the Kiwi a window of greater stability. Trading between a low of 0.7093 and a high of 0.7160 over the past 24 hours, providing only a limited degree of support for the Kiwi dairy product prices increased at the global dairy trade auction late last night, gaining ground for the 8<sup>th</sup> time from the past nine auctions. Given gains were in line with markets expectations broader catalysts for a move higher have been few and far between this week. Opening marginally lower at a rate of 0.7110 RBNZ Governor Graeme Wheeler is speaking shortly before the Finance Select Committee in Wellington.

BY OFX

Geo-Political Risks remain the driving force


Australian Dollar

AUD / USD

Expected Range

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

Expected Range

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.

Majors

USD, EUR, JPY

Expected Range

N/A

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 &ldquo;No&rdquo; 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

Expected Range

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.

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