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AUD / USD
0.7625 – 0.7740
The Australian dollar edged lower into the weekly close sliding back below 0.77U.S cents despite wide spread USD weakness. The Greenback gave up losses against the Yen and a basket of major currency counterparts as investors question the likelihood of swift amendments to U.S tax reform and increased fiscal stimulus. The AUD has struggled to hold onto gains enjoyed above 0.7690/0.77 having found itself largely range bound between 0.7630 and 0.7730. Having failed to break resistance at 0.7730 the Aussie appears at the top of its recent rally, however should GDP swing higher there is scope for further upside. Despite a string of reasonable macroeconomic indicators the expected interest yield between Australia and the US remains largely unchanged with the RBA likely to maintain record low interest rates. Wednesday' GDP print may be the catalyst needed to break the cycle of neutral monetary policy. A poor print will mark a 2nd consecutive quarterly decline and by technical definition push the economy into recession opening the door to a possible rate cut. Attentions today turn to the U.S docket for headline macroeconomic indicators.
Great British Pound
GBP / AUD
1.6150 - 1.6350
The Great British Pound opened this morning little changed when valued against its US Counterpart with the pair retreating from a weekly high of 1.2569. During Friday' session BBA Mortgage Approvals surged to their highest in a year in January, up to 44.7K mortgages in January, and up from 43.6K in December. ON the local data front this week it begins with Wednesday' Manufacturing PMI for the month of February with markets forecasting a reading of 55.5. Mortgage Approvals will also be released on Wednesday for the month of February. Rounding off the week Construction PMI on Thursday is forecast at 52.4. Services PMI on Friday is forecast at 54.2. The GBP/USD pair is currently trading at 1.2457. We now expect support to hold on moves approaching 1.2430 while any upward push will likely meet resistance around 1.2485.
USD, EUR, JPY
Still playing on the back of investor minds last week were the minutes of the Federal Reserve which have dampening demand for the world' largest reserve currency, they revealed the Feds uncertainty with Trump' economic agenda. USD/JPY closed the week down at 112.14, having reached 113.77 earlier in the week. Through mixed bag of economic data out of the US the Euro initially gained touching levels of 1.0618 before falling back into negative territory. U.S New Home Sales rose by 3.7% which came in under expectations of 6.3% and in a separate report the University of Michigan confirmed the Consumer Sentiment Index hit 96.3 this month, slightly above expectations. Support for the EUR/USD sits at 1.0520, any moves held above 1.0600 could favour a recovery in the pair.
New Zealand Dollar
NZD / USD
0.7130 - 0.7245
The New Zealand dollar traded in a tight range last week testing resistance levels at 0.7240 on Friday evening. With little domestic news on Friday, markets were flat leading into the American session. U.S new home sales were softer and consumer sentiment dropped for the first time since Trumps election win. A busy week for economic data both domestically and offshore kick started by local Visitor arrival numbers and Trade balance figures on Tuesday. The Kiwi opens this morning at 0.72 against the US Dollar.
0.7660 – 0.7760
The Australian dollar broke through and held onto gains above 0.77 U.S cents yesterday buoyed by wider USD weakness. Having broken resistance at 0.7690 for a second consecutive week the AUD appears poised to gap higher if it can cement recent gains and push through 0.7730. The Aussie has enjoyed strong gains throughout the year thus far and looks well placed to continue upward if the yield advantage remains intact. A strengthening current account deficit buoyed by an upswing in commodities lead by Iron Ore and Coal and an RBA governor confident the economy can continue to expand there is scope for a push toward 0.80. Of course much depends on the continued uncertainty that surrounds the Trump administration and its impact on Fed policy changes as attentions today turn to Governor Lowe for greater insight into RBA policy thinking and continued political shifts across Europe.
1.6150 – 1.6350
The Great British Pound jumped making strong gains against the US Dollar breaking through 1.25 resistance level, it touched an eventual high of 1.2560 which was a level not seen since February 10th. The catalyst for the move was driven by a rebound in U.K Retail Sales, the survey of 128 firms, of which 64 were retailers showed that sales volumes are expected to rise again in the year to March. The slight increase in overall retails sales volumes were assisted by clothing and non-store sectors. With Cable currently changing hands at 1.2553, investors will next focus on today' BBA Mortgage Approval. It' leading indicator of housing market demand for the UK and measures the number of new mortgages for home purchase were approved by the British Bankers Association, the BBA represents major banks that make up around 65% of the total UK mortgage lending.
The US Dollar moved lower across the board through trade on Thursday relinquishing hard fought gains won earlier in the week as comments from Trump administration officials weighed heavily on the worlds base currency. Having drifted sideways for much of the day the Dollar moved downward as Treasury Secretary Steven Mnuchin suggested that policy steps and Tax Reform were unlikely to impact the economy this year. The comments appeared to mute Trumps recent promises and again throw into question when and where Trump will deliver the fiscal and reformist policies proffered throughout the electoral campaign. Moving through 113 JPY the USD touched two week lows at 112.57 while the Euro met resistance on moves approaching 1.06. Any advance for the 19 Nation combined unit was muted by new polls that showed Nationalist candidate Marine Le Pen was closing the gap on Independent Emmanuel Macron. Falling against a basket of counterparts excluding the Dollar the Euro remains increasingly vulnerable to political risk and rising uncertainty.
0.7160 – 0.7280
The New Zealand Dollar staged a comeback following comments by the new US Treasury Secretary Steven Mnuchin who told CNBC that he wanted to see a significant tax reform passed before congress’ August recess which is no more than six months away. The aim is to focus on middle-income tax cut and simplification for business, with no further clues on this markets were disappointed who have been expecting the Trump administration to deliver on promises of tax reform, infrastructure spending and a cut in regulation. In other news, US Initial claims increased last week from 238k to 244k for the week ending February 18th which assisted the NZD/USD pair holding above 72c, currently changing hands at 0.7230.
0.7630 – 0.7730
The Australian Dollar drifted lower from Wednesdays open to an intraday low of 0.7667 as Wage growth continues to disappoint. Reserve Bank governor Philip Lowe suggested in his Australia -Canada Summit speech that he does not expect wage growth to continue lower. The seasonally adjusted reading of 0.5% for the December quarter was on par with market expectations. Construction work data also failed to disappoint, falling 0.2% for the last quarter 2016, but had little impact on the local currency. Spirits were restored shortly after as Chinese home prices continued to rise, boosting the Australian dollar, hitting eventual highs of 0.7697 to close the Asian session. The Federal Reserve minutes overnight failed to give any hints as to when the next interest rate increase might be with the rhetoric wording of “fairly soon” producing US dollar weakness. The Aussie continues to test major resistance at current levels and opens at 0.7710 ahead of the local Private Capital Expenditures data this morning.
1.6050 – 1.6300
The Great British Pound weakened against the Greenback as UK fourth quarter GDP data was revised up by 0.1pp to 0.7% which further confirmed a more resilient economy following the EU referendum. The Office for National Statistics reported strong consumer spending and services output but was offset by a fall in fixed investment spending. Following the report, the Cable fell from 1.2470 to 1.2440 and touched an eventual low of 1.2410. With the economic calendar light for the reminder of the week the pair will look offshore for direction. GBP/AUD marginally lower at 1.6145 and GBP/NZD at 1.7309 at the time of writing.
0.7120 – 0.7240
Despite a strong U.S existing Home Sales print for January of 5.69 million which was well above expectations of 5.55 million the NZD/USD had little reaction to the data as it eagerly anticipated the release of the US Federal minutes. The minutes of the previous meeting showed that a strong currency could hurt the US economy and that officials said it may be appropriate to raise interest rates again ‘fairly soon’ should jobs and inflation data come in line with expectations. As soon as news hit the wires the pair moved from 0.7130 to 0.7190 and has consolidated at this level.
0.7600 - 0.7730
Once again it was a fairly lackluster day for the Australian dollar, slowly moving to an overnight low of 0.7650 before the USD was sold off across the board on a lower than expected Manufacturing PMI reading. Starting the day at 0.7685, the Aussie dropped twenty points on the release of the RBA monetary minutes highlighting disappointing GDP growth for the third quarter. They also noted the “deprecation of exchange rates since 2013 had assisted the economy in its transaction following the investment boom”. Investors looks to Governor Philip Lowe' speech this morning at this year' Australia-Canada Leadership Forum along with domestic wage price data where the annual growth rate has fallen every quarter bar one, since 2012. The Australian Dollar has squared overnight losses and opens at 0.7680.
Following the Bank of England' February Inflation report the Great British Pound came under selling pressure moving from 1.2475 touching a low of 1.2400. The UK posted a surplus in 6 months however it fell short of expectations 9.8 billion vs 14.4 billion. Adding fuel to the fire was comments by MPC member Gertjan Vlieghe that economic forecasting can never be completely accurate and that they probably will not forecast the next financial crisis or next recession. Last year it had anticipated an economic slowdown after the Brexit vote but in fact the economy continued to grow and weathered Brexit quite well. In other news, UK Public Sector Net Borrowing showed a smaller-than-expected surplus in January of 9.4 billion Pounds, UK Chancellor MR Hammond intends to bring Britain' Budget down to 3.5% of GDP. Investors turn to UK' Second Estimate GDP data today.
The Dollar rallied through trade on Tuesday as U.S markets reopened after a long weekend and the Euro suffered heavy selling on heightened political risk. Commentary from Cleveland and Philadelphia Fed officials’ bolstered demand for the world' base currency as the regional presidents echoed Janet Yellen' rhetoric of last week, hinting 3 rate hikes throughout the course of the year would still be appropriate. CME' Fed Watch Tool tracked an increase in those expecting multiple rate hikes while a March policy amendment gained greater momentum advancing some five percent. The Greenback edged back toward 114 JPY breaking through 113.50 while the Euro suffered one its steepest daily depreciations in more than a month. Tumbling through 1.06 and 1.0550 the Euro touched intraday lows at 1.0527 as anti-European Union rhetoric intensifies. As nationalist candidates Marine Le Pen and Gert Wilders gather support in France and the Netherlands there are increasing concerns a shock victory in either country could signal a further European breakup. As attentions remain squarely focused on evolving electoral polls the FOMC/Fed meeting minutes and will provide focussed direction throughout trade on Wednesday.
0.7080 - 0.7240
The New Zealand dollar moved marginally lower through trade on Tuesday touching intraday lows at 0.7130. The Kiwi came under selling pressure following a softer than anticipated Global Dairy Trade Auction in which prices for whole milk powder fell 3.7%. The poor print comes after marked declines in early January and December forcing prices toward March 2015 highs. A break below this level may erode confidence in the recovery and spark a deeper price drop. With Fed officials spruiking a hawkish tone attentions now turn to the FOMC meeting minutes for direction through trade on Wednesday.
0.7600 – 0.7700
The Australian dollar traded in a tight 25 pip range for a conservative start to the week as the annual Presidents Day holiday produced low liquidity in the markets. Opening Monday morning at 0.7765, The Australian dollar topped out at 0.7690 and could potentially test the 0.77 handle once again this week. With domestic data light on, the spotlight turns to central banks as investors look for any change in monetary stance by the RBA in today' policy minutes release along with the FOMC on Thursday. The Australian dollar opens this morning at 0.7685 against its US counterpart.
The Great British Pound advanced against its US Counterpart reaching an overnight high of 1.2483 during the London morning, before settling around 1.2460 in late afternoon trade. However, amid a holiday in the US market volatility remains lows. There were some minor macroeconomic releases in the UK overnight starting with the release of Rightmove House Price Index which was up 2 percent for the month of January. CBI Industrial Order survey was also better than expected up to 8 from previous 5. While another quiet day is expected, ahead attentions will turn to today' Inflation Report Hearing and Public Sector Net Borrowing.
Markets offered little to excite movement through trade on Monday as U.S investors enjoyed an extended weekend in observance of Presidents Day, ensuring volumes remained thin and price action muted through much of session. The Euro edged marginally higher as the 19 nation combined unit shrugged off advances by far right presidential candidate Marine Le Pen holding onto gains above 1.06. While the cloud of political uncertainty weighs heavy on the Euro the impact in financial markets seems focussed on bonds rather than currencies at this point. Markets are still pricing in a win for Centrist favourite Emmanuel Macron ensuring reasonable support to the downside for the Euro. With U.S markets re-opening today attentions turn to Key Manufacturing and Services data as drivers of Macro movements while political uncertainties shape wider direction. <br>
0.7140 – 0.7240
On the back of a US holiday the New Zealand dollar opens this morning little changed when valued against its US Counterpart. Local domestic economic factors continue to be positive for the Kiwi dollar with yesterday' Producer Price Index (PPI) for the fourth quarter rose more than expected. For the three months ending in December Input prices rose 1 percent, while output prices rose 1.5 per cent which pointed to inflationary pressures. Attentions now turn to tonight's Global Dairy Trade auctions. The NZD/USD pair is currently trading at 0.7187. We now expect support to hold on moves approaching 0.7138 while any upward push will likely meet resistance around 0.7239.
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