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BY JOEL HOLMES

Markets calm as European political risks take focus


Australian Dollar

AUD / USD

Expected Range

0.7600 – 0.7690

The Australian dollar opened this morning little changed when valued against its US Counterpart at a rate of 0.7640. With no macroeconomic news released yesterday the Aussie dollar maintained a relatively tight trading range. On the back of US Dollar weakness, the AUD/USD pair reached an overnight high of 0.7665 in early US trade before retreating to a low of 0.7611. We now expect support to hold on moves approaching 0.7615 while any upward push will likely meet resistance around 0.7710. Attentions turn to today' HIA New Home Sales for December will be released at 11am AEDT, followed 30 minutes later by the NAB Quarterly Business Confidence survey.

Great British Pound

GBP / AUD

Expected Range

1.6350 – 1.6500

The Cable cross has bucked current downtrend to climb from support levels of 1.2480 in a tight range overnight to trade higher on open in the Asian session this morning (1.2540). The Great British Pound climbed higher as Britain' lower house of parliament passed legislation allowing Theresa May, The Prime Minister of Great Britain to allow Brexit processes to officially take place. Bank of England MPC hawkish member Kristin Forbes has stated she is wary of inflation climbing above the 2% target rate and members could start looking to shift their stance to vote for an interest rate hike earlier than expected. Retail Sales fell by 0.6% as consumers continue to cut back on spending and the British House Price Index declined by 0.9%. Sterling opens higher against the Australian Dollar 1.6400, and Kiwi as RBNZ left interest rates on hold (1.7275)

Majors

USD, EUR, JPY

Expected Range

N/A

The US Dollar index struggles to keep its head above 100 overnight in a fairy flat trading session on fx markets. The USD/JPY cross managed to climb back into the 112 region after drifting to an overnight low of 111.70 in correlation with US 10 year yields dropping for a fourth straight day and a three week low 2.34%. Wall St closed flat, S&P -0.1% for the day. Iron ore continues its rally as the Chinese market comes back post-lunar New Year and is close to 2 ½ year highs. EUR/USD paired losses overnight dropping to 1.0640 in overnight trading before recovering back to test resistance at the 1.07 mark on open this morning. Investors are turning its attention away from the US as delays in policies continue and are now focusing on political events in France in Germany. The market looks to a number of Central Bank members speaking across the world today along with Unemployment claims in the US.

New Zealand Dollar

NZD / USD

Expected Range

0.7210 – 0.7330

The New Zealand Dollar opens at 0.7250 against the U.S Dollar, 60 pips lower than this time yesterday on the back of the Reserve Banks of New Zealand' interest rate decision. The official cash rate as widely expected was unchanged at 1.75% however, in a statement released the banks governor Mr Graeme Wheeler said “Monetary policy will remain accommodative for a considerable period” hinting that interest rates could stay low for most of the coming year. He went on to mention that the outlook remains positive which is being supporting by “ongoing accommodative monetary policy, strong population growth, increased household spending and rising construction activity”. Mr Wheeler commented on the Kiwi being higher than is sustainable for balanced growth and that a decline in the exchange rate is was needed. Wheeler is due to speak in a press conference this morning.

BY JOEL HOLMES

Dollar prospers on heightened political uncertainty


Australian Dollar

AUD / USD

Expected Range

0.7600 - 0.7690

The Australian Dollar opened this morning little changed when valued against its US Counterpart. During yesterday' trade the AUD/USD pair moved higher following the release of the Reserve Bank of Australia' February monetary policy statement, the decision to leave rates unchanged, saw the Aussie dollar reach an intraday high of 0.7680. The accompanying RBA statement outlined reason for optimism in their decision to leave rates on hold in anticipation of a gradual lift in growth and inflation. A quiet session expected ahead today locally with no economic data due. The AUD/USD pair is currently trading at 0.7625. We now expect support to hold on moves approaching 0.7590 while any upward push will likely meet resistance around 0.7700.

Great British Pound

GBP / AUD

Expected Range

1.6220 - 1.6420

The Great British Pound recovered some of its earlier lost ground against the US Dollar posting a high of 1.2546 up 1.5% on the day as Kirsten Forbes an external member of the Bank' Monetary Policy Committee (MPC) said that that an interest rate rise could be warranted. She believes that there is some evidence that inflation was starting to pick up faster than expected and there was little sign that the economy was about to worsen. Another MPC member is due to speak later today along with the Bank of England Governor on Thursday, further hawkish comments could provide near-term support for the cable around levels of 1.2260.

Majors

USD, EUR, JPY

Expected Range

N/A

The US Dollar Index (DXY) has regained some of this week' losses climbing 0.45% and strengthening against the majority of major currencies in overnight trading. No news out of the White House regarding expected pro-growth policies caused the Dow Jones to drift lower after continuing its run to all-time highs with 10-year yields below 2.40%. Federal Reserve Bank President Patrick Harker believes the March Central Bank meeting is still live and an interest rate hike is possible. He advised he is currently supportive of three hikes this year. USD/JPY managed to find support at 111.90 with movements back into the US Dollar, we find the cross regain its momentum and opens at 112.30. Turning our attentions across to the Eurozone, German industrial production put out a disappointing reading turning sharply by 3% for the month of December triggering a EUR sell off below 1.07 against the US Dollar.

New Zealand Dollar

NZD / USD

Expected Range

0.7210 - 0.7370

The New Zealand Dollar rallied more than half-a-cent intraday from 0.7315 to 0.7368 as long-term inflation expectations for local businesses rose in the final quarter of 2016. In a report released which is closely tracked by the Reserve Bank of New Zealand the anticipated inflation rate came in at 1.9% over the next 2-years and sits close to the RBNZ' target of 2%. The survey does fuel expectations of a rate rise by the Central Bank this year but is largely expected to hold this Thursday at 1.75%. Despite a 1.3% advance in the Global Dairy Trade Price Index offshore comments regarding interest rate hikes made by the U.S Federal Reserve President Patrick Harker saw the Kiwi reverse gains falling to a low of 0.7276, he told reporters that he backed three rate hikes this year. The NZD/USD pair currently changing hands at 0.7310 at the time of writing.

BY JOEL HOLMES

Draghi defends single currency - Euro Irreversible


Australian Dollar

AUD / USD

Expected Range

0.7600 - 0.7750

Yesterday the Australian Dollar traded lower against the US Dollar on the back of weaker commodity prices and strength in US treasuries. Retail Sales data yesterday fell 0.1 per cent for the month of December. As a result the Aussie traded at a low of 0.7629 before rebounding late in the New York session. The AUD/USD pair is currently trading at 0.7662. We now expect support to hold on moves approaching 0.7630 while any upward push will likely meet resistance around 0.7695. Attentions today turn the Reserve Bank of Australia which meets for the first time in two months releasing the interest rate decision & policy statement. While it is unlikely the RBA will move on Interest Rates there' likely to be plenty of attention on the accompanying monetary policy statement.

Great British Pound

GBP / AUD

Expected Range

1.6150 - 1.6320

The Great British Pound edged marginally lower through trade on Monday unable to break back above 1.25 U.S cents. Bouncing about a relatively tight range Sterling touched intraday lows at 1.2429 supported by a drop in U.S treasury yields as traders increasingly question whether or not Trump will be able to deliver on pro-growth strategies and refrain from talking down the U.S Dollar. Despite losses through the end of last week the Pound has been well supported since Prime Minister Theresa May outlined a clear and definitive path to Brexit eliminating a large portion of the uncertainty that was keeping the unit down. With little macroeconomic data on hand to drive direction politics will again govern movements throughout most of the session.

Majors

USD, EUR, JPY

Expected Range

N/A

Despite a lack of major data in overnight trading the US dollar has continued its down trend as USD/JPY cross had 112 stops taken out and trades at two month lows (111.60). Stocks fell from their record levels to close 0.2% lower on the S&P 500 as the market continues to wait on Trumps administration promised pro-growth policies. Japanese Yen was the largest mover of the majors reflecting current political risks. EUR/USD was trading higher on open (1.0750) despite testing 1.07 short term support. Mario Draghi has come out overnight stating that the Euro is irreversible as he continues to defend the single currency. French presidential candidate Marine Le Pen said she would take France out of the European zone should she win the election. USD direction continues to be hampered by the cautious fed reserve tone with markets now pricing just under two rate hikes for the year and 10 year yields dropped five basis points to 2.41%. Attention turns to the land down under this morning where the RBA expects to keep interest rates on hold at 1.5%

New Zealand Dollar

NZD / USD

Expected Range

0.7235 - 0.7380

The New Zealand dollar opens this morning little changed having held onto gains above 0.73 U.S cents. After rallying strongly to close the week the NZD maintained a relatively tight 50 point range through much of Monday' session, bouncing between intraday lows at 0.7285 and session highs at 0.7326. With little macroeconomic data on hand profit taking saw investors force the unit back below 0.73 before softer U.S treasury yields bolstered demand for the higher yielding NZD and markets carried the unit higher again. With attentions now turned to 1st quarter inflation expectations we are watching a break above 0.7355 as a marker for further upward momentum.

BY JOEL HOLMES

Dollar index hits six week low


Australian Dollar

AUD / USD

Expected Range

0.7600 – 0.7710

The Australian Dollar advanced against the US Dollar on Friday to a high of 0.7696 on the back of mixed US Payroll data. This week the economic calendar is jam-packed with data kicking off this morning with Retail Sales and ANZ Job Advertisements for the month of January. On Tuesday, the Reserve Bank of Australia meets for the first time in two months releasing the interest rate decision & policy statement. In addition, we will hear from Governor Philip Lowe. The AUD/USD pair is currently trading at 0.7679. We now expect support to hold on moves approaching 0.7629 while any upward push will likely meet resistance around 0.7691.

Great British Pound

GBP / AUD

Expected Range

1.6080 - 1.6350

The Great British Pound edged lower into the weekly close sliding back below 1.25 despite softer than anticipated U.S wage growth. Sterling fell four tenths of one percent through trade on Friday touching intraday lows at 1.2477 as uncertainty surrounding the Brexit process weighed heavily on currency. Profit taking after the recent rally coupled with a revolt within Parliament and a new round of court battles debating the legality of Brexit, this time disputing ballot papers raised concerns around the stability of the economy and the proposed exit plan. With politics continuing to drive direction a relatively quiet macroeconomic docket will likely pose little threat to wider movements as investors continue to react to Brexit news.

Majors

USD, EUR, JPY

Expected Range

N/A

The Final Non-Farm Payroll employment figures under President Obama produced a 227,000 increase in jobs, the highest figure in four months. While the employment figures were positive, there was also a climb in the unemployment rate to 4.8%. More importantly, wage growth was a disappointment hindering further chances of a Federal Reserve rate hike in March which has slipped to a 13% possibility after Friday night' results. Despite upbeat jobs data, the US dollar index declined for the sixth week as the market continues to be sold off on Trump trades. EUR/USD continued its climb higher chasing December highs (1.0875) and USD/JPY continues to test critical support at 112.50 as 10-year JGB yields jumped as high as 0.155% surprising markets and sending the Japanese Yen higher. Yields then eased as BOJ intervened with a special bond purchase. Bank of Japan minutes noted that inflation expectations continue to be in a weakening stage with the board voting to maintain its -0.1% interest rate on current accounts and annual bond holdings at approximately JPY 80 trillion. This week the market focuses its attention towards Australia and New Zealand as both central banks expect to keep their interest rates on hold. Along with the continued watch on new Administration policies in the United States, there will be interest in the UK this week as the final vote on Article 50 bill in the House of commons takes place.

New Zealand Dollar

NZD / USD

Expected Range

0.7240 - 0.7380

The New Zealand Dollar traded sideways intraday stuck between a 25-pip range of 0.7270 and 0.7295. Early morning saw the release of the ANZ Commodity Price Index which showed a slight drop of 0.1% for the month of January but still up 19% from this time last year, the NZD had little reaction to the news and took most of its direction offshore. The pair gradually moved higher breaking 73c against the Greenback to touch an overnight high of 0.7330 through a mixed bag of data out of the United States. The U.S department of Labour reported that the economy added 227k jobs smashing expectations for January however, the unemployment rate edged higher last month coming in at 4.8%. New Zealand observes a bank holiday today and therefore markets will wait for tomorrow' Inflation Expectations ahead of Thursday RBNZ interest rate decision.

BY MATT RICHARDSON

U.S Dollar continues weakness post FOMC announcement


Australian Dollar

AUD / USD

Expected Range

0.7560 – 0.7760

The Australian Dollar was fuelled yesterday by the largest trade balance surplus since records begin in 1971. Yesterday' reading of a $3.51bn trade surplus surprised markets, driving the Aussie through November 2016 resistance levels of 0.7620. Less likely now of a 2nd contraction in GDP figures and supporting the likelihood of our Triple A credit rating left intact, the AUD/USD topped out at 0.7696 in overnight trading and opens this morning above support at 0.7660. Attention turns to United States Non-Farm Employment figures this evening before heading into next week' RBA interest rate decision where it is expect interest rates will remain on hold for the month of February.

Great British Pound

GBP / AUD

Expected Range

1.6200 – 1.6700

The Great British Pound is weaker today when valued against its US counterpart falling overnight to 1.2525 on the back of comments made by the UK Central Bank Governor Mark Carney. The Bank of England left rates and the APP unchanged by an unanimous decision, however Governor Carney seemed a little concerned about rising inflation, while upgraded its growth forecasts for the next three years. Only one major data release overnight UK construction PMI index which hit a five-month low in January of 52.2, though still indicating modest growth, it was the weakest recording since August. The GBP/USD pair is currently at 1.2533 which is 0.97 per cent down on the previous days close. We now expect support to hold on moves approaching 1.2470 while any upward push will likely meet resistance around 1.2600.

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S Dollar continued its precipitous downward slide throughout trade on Thursday as markets reacted to the Fed Reserve and FOMC' latest policy announcement while unease surrounding President Trump' protectionist trade polices escalated. Investors were left wanting following the FOMC' press statement and rate decision as expectations a possible March rate hike were all but wiped from the table. CME' Fedwatch tool saw expectations for a rate adjustment slashed from twenty to fifteen percent as the board, despite spruiking a hawkish assessment of the wider economy, offered little to promote an imminent policy change. The USD fell through 113 JPY touching intraday lows at 112.08 while the 19 nation Euro touched intraday highs at 1.0826 before paring gains. The Euro moved through 1.08 for the first time since the November 8 election on Tuesday after Peter Navarro, Trade advisor to President Trump, said the unit was grossly undervalued. Breaking resistance at 1.0830 could signal a shift in wider sentiment and prompt moves toward 1.10 and 1.12. Attentions today turn to key U.S labour market data for direction into the weekly close.

New Zealand Dollar

NZD / USD

Expected Range

0.7240 – 0.7340

The New Zealand Dollar gained nearly a full cent in yesterday' local session opening at 0.7240 post the FOMC announcement in early trading. Offshore Unemployment claims in the United States did little in market movements with the Kiwi reaching an eventual high of 0.7338 before being sold off and reversing all gains as US dollar regained its momentum to sit at 0.7290 on open. Volatility is expected to calm down today with little local data on the horizon heading into this evenings US session.

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