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BY SHAMEEM MUSA

US Dollar rises on inflation data


Australian Dollar

AUD / USD

Expected Range

0.7430 – 0.7630

The Australian dollar edged lower through trade on Wednesday but managed to hold onto moves above 0.75 U.S cents. Renewed optimism surrounding U.S inflation expectations helped the world' base currency reverse the downward trajectory of the past 5 sessions as investors considered the merits of Trump jawboning against increasing price pressures. The Aussie dollar having touched intraday highs at 0.7564 fell more than half a cent to 0.7510 throughout trade overnight. Attentions now turn to local employment data for direction throughout the domestic session with investors keeping one eye on Friday' Presidential inauguration. U.S political fortunes and policy uncertainties have been the driving force behind the recent AUD rally and a primary directional indicator through the week and month ahead.

Great British Pound

GBP / AUD

Expected Range

1.6250 – 1.6450

The Great British Pound retracted from the previous session gains and is down 1% currently changing hands at 1.2255 against the Greenback. Despite U.K jobless claims falling for the month for December and wages increasing investors are digesting PM Theresa May' Brexit plans and what that will mean for the future of the UK. It is almost certain that the UK Supreme Court will vote in favour of Article 50 which could see further gains in the GBP/USD, but as the reality of a hard Brexit returns as too will the sellers.

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S Dollar countered downward moves through trade on Wednesday moving marginally higher against a basket of major currency counterparts. Following five consecutive daily declines markets took stock of positions as rising U.S living costs and tightening labour market conditions bolstered or prompted heightened inflation expectations. Investors paused and considered the merits of Trumps recent jawboning against the possibility of renewed price pressures and a faster pace of monetary policy change. The Bloomberg Dollar Spot Index rallied some 0.5% while the Yen suffered as investors moved away from haven assets. The Dollar moved back through 114 JPY to touch intraday highs at 114.3050 while the Euro fell back through 1.0650. With attentions turned to Fed Chair Janet Yellen this morning the Central Bank President affirmed the Fed' commitment to a measured and gradual monetary policy amendment plan, suggesting the economy was showing signs of renewed health and growth shifting the focus back to Friday' inauguration and the incoming Trump. A fresh spout of jawboning and failure to deliver a clear policy path will only foster heightened uncertainty and possibly spur a fresh bout of USD selling.

New Zealand Dollar

NZD / USD

Expected Range

0.7090 – 0.7210

Having lead the gains amongst the commodity currencies the session prior the New Zealand Dollar came under selling pressure during offshore trade as upbeat U.S macroeconomic data forced a reversal of recent gains. The NZD/USD moved from session highs of 0.7215 to current levels of 0.7125, a drop of 1.2%. Attention now turns to local Business NZ Manufacturing Index and Building Permits due today.

BY SHAMEEM MUSA

Pound jumps the most in 8 years


Australian Dollar

AUD / USD

Expected Range

0.7480 - 0.7630

The Australian Dollar surged higher through trade on Tuesday breaking through the psychological 0.75 handle touching intraday highs at 0.7564 as comments from President Elect Donald Trump and a surge in commodities forced the USD lower. In an interview with the Wall Street Journal Trump suggested the U.S Dollar was overvalued, lashing out at China and its currency management strategies. The comments fuelled fears of a heavy handed protectionist approach and a rift between Beijing and Washington forcing investors to continue the downward USD correction. The AUD found further support in surging commodity prices. Bloomberg' commodity Index touched 7 month highs as Iron Ore and Copper largely held on to recent gains. Having broken the back of resistance at 0.75 the AUD is now poised for an extended push with stops at 0.7630 and 0.77. Attentions now turn to Fridays Presidential Inauguration for wider direction with investors positioning themselves through trade on Wednesday and Thursday. Should Trump fail again to proffer a clear policy platform then the USD remains vulnerable to deeper downside moves.

Great British Pound

GBP / AUD

Expected Range

1.6300 - 1.6500

The much anticipated Brexit speech from UK Prime Minster Theresa May caused markets to rally pushing GBP/USD 3% higher to close around 1.2400. The PM confirmed that the UK will leave the EU single market when it leaves the EU but parliament would be given a vote on the final terms which eased markets. May said Britain would aim to establish its own free trade agreements with countries and impose limits on immigration which many Brits support and agree that greater control over immigration is more important than access to the single market. In other news, UK inflation hit a two-year high coming in at 1.6% vs an expected reading of 1.4% thanks mainly to a weaker pound since the Brexit vote continues to push up cost in the UK.

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S Dollar continued lower through trade on Tuesday touching 4 week lows following comments from President Elect Donald Trump. Sterling lead the charge against the embattled Greenback marking its largest single day rally since 1998 while the Yen extended gains through a 7<sup>th</sup> consecutive session and the Euro moved through 1.07. On returning from a long weekend North American investors scrambled to manage positions following comments from Donald Trump in the Wall Street Journal. The incoming President suggested the USD was overvalued, again lashing out a China and policy maker' currency management. The comments heightened concerns surrounding protectionist rhetoric and the optimism surrounding the new President' ability to deliver on Growth promises continues to wane; there is an overwhelming sense within the market that Trump may be spreading himself thinly across a wide range of action areas rather than focusing and seeing through specific policy platforms. As politics continues to dominate direction attentions turn to Friday' inauguration for wider medium term direction.

New Zealand Dollar

NZD / USD

Expected Range

0.7100 - 0.7275

The New Zealand Dollar rallied one cent higher yesterday against the US Dollar from levels of 0.7100 to 0.7200. The main catalyst for the move were comments from President-elect Trump released by the Wall Street Journal saying the USD was too strong and that US companies can&rsquo;t compete with China because of it. The US Dollar Index fell 0.8% to its lowest level in one month. As noted recently, any comments by Trump can easily trigger a market reaction and with the market being long USD traders are quick to sell and square up.

BY BRETT OTTAWA

Trump comments still weigh heavily on USD


Australian Dollar

AUD / USD

Expected Range

0.7380 – 0.7520

The Australian dollar edged marginally lower through thin holiday affected trade on Monday. With US markets closed in observance of Martin Luther King Jnr Day liquidity remained thin and volumes light forcing the AUD into a relatively tight 30 point range for much of the day. Having rallied early, attempts to break through 0.75 were quashed as profit taking took hold and the currency slipped back toward intraday lows at 0.7459. Investors appeared content in squaring positions ahead of a week filled with frontline risk events. As politics dominates direction attentions turn to UK Prime Minister Theresa May and insights into the governments Brexit plan. Having moved back through 0.60 pence the AUD appears poised to break 12 month highs as heightened fears for a hard Brexit prompt weaker GBP rallies and heavier downward corrections.

Great British Pound

GBP / AUD

Expected Range

1.6000 - 1.6200

The Great British Pound began the week falling against the USD touching its lowest level since the "flash-crash" of mid-October. The GBP/USD pair, traded at over 30-year lows, reached an overnight low of 1.1987 before recovering back above 1.20 level. The GBP/USD is currently trading at 1.2040. We now expect support to hold on moves approaching 1.1970 while any upward push will likely meet resistance around 1.2085. Attentions now turn to Theresa May upcoming speech in which she is expected to discuss a Hard Brexit. On the data front the UK will release CPI for the month of December, which is expected to jump to 1.4%, up from the previous months reading of 1.2%.

Majors

USD, EUR, JPY

Expected Range

N/A

The US Dollar sell off slowed through trade on Monday as most investors observed Martin Luther Kind Jnr Day and enjoyed the subsequent long weekend. Edging marginally lower against the Japanese Yen to touch 113.71 and clawing back Euro losses the Greenback steadied following its worst weekly performance since the President Elects November victory. The Dollar index moved four tenths of a percent higher, however remains vulnerable to further downside. Implied volatility and options prices surged, touching fresh monthly highs and suggesting a heightened degree of nervousness within and across the market. While the soon to be incumbent Trump continues to skirt around front line policy announcements the optimism that surrounded his accession will waver, adding to risk adversity and heightened uncertainty. Politics and not economic will continue to drive direction through trade on Tuesday with attentions turning to UK Prime Minister Theresa May ahead of Friday' inauguration.

New Zealand Dollar

NZD / USD

Expected Range

0.7000 - 0.7200

The New Zealand dollar opens this morning little changed when valued against its US Counterpart at a rate of 0.7101. With US markets closed in observance of Martin Luther King Jnr Day liquidity remained thin. The New Zealand dollar however still trading near a two-month high against the British pound as fears of a Hard Brexit continue to escalate. The pair is currently trading at 1.6947 up nearly 0.5 per cent from last weeks close. Today we see the release of Real Estate Institute house sales data and the Global Dairy Trade auction tonight.

BY OFX

Australian Dollar fights back


Australian Dollar

AUD / USD

Expected Range

0.7430 – 0.7520

The Australian Dollar has made a comeback against the US Dollar recovering from half of its losses since president elect Donald Trump' shock win in November. The main catalyst behind the move is growing optimism from Australia' largest trading partner China and rising coal and iron ore prices coupled with concerns around Trump and what may eventuate once he enters Office. The local unit tested the 0.7500 handle several times last week and as Australia sees the release of consumer confidence and Employment figures in the days ahead it is likely to test these levels once ahead if not break through.

Great British Pound

GBP / AUD

Expected Range

1.5825 - 1.6325

The Great British Pound fell through 1.20 for the first time since October as fears of a hard exit from the European Union were amplified at the weekend. Prime Minister Theresa May confirmed immigration will run front and centre in any exit negotiations suggesting she would withdraw or give up tariff free trade for the ability to control cross border movement. The comments sparked a heavy GBP sell off and Sterling fell against all major currency counterparts. Opening this morning at 1.1981, its lowest level since October 7<sup>th</sup>, direction through the week will be dominated by Brexit expectations as attentions turn the PM' next address on Wednesday.

Majors

USD, EUR, JPY

Expected Range

N/A

The USD marked its worst weekly performance since November edging lower through trade on Friday as increasing uncertainty surrounding US domestic and foreign policy fuelled fears the economy would not live up to post-election optimism. The Greenback fell through 114.50 JPY marking a 2% depreciation through the week while the Euro comfortably held onto the gains above 1.06 after hitting five week lows on Thursday. The dollar index was last down at 101.190 having fallen 1% through the week. Investor' nervousness surrounding the dearth of information outlining Trump' deregulation and fiscal stimulus plans have forced a steep correction in USD expectations as markets squared positions ahead of this week' long weekend and today' observance of Martin Luther King Day. With little action through the docket attentions and direction will again be driven by shifting optimism.

New Zealand Dollar

NZD / USD

Expected Range

0.7050 - 0.7200

The New Zealand Dollar advanced against the US Dollar on Friday as political uncertainty surrounding U.S. President-elect Donald Trump' presidency continued to weigh on the worlds base currency. The kiwi rose 0.37% a daily high of 0.7144. The pair is currently trading at 0.7127. We now expect support to hold on moves approaching 0.7043 while any upward push will likely meet resistance around 0.7172. Attentions now turn to Food Price Index for December as a marker of fourth quarter inflation forecasts.

BY OFX

Waning US optimism prompts heavy USD sell off


Australian Dollar

AUD / USD

Expected Range

0.7390 – 0.7540

The Australian dollar rally continued through trade on Thursday pushing through resistance at 0.7470 and breaking back above the psychological 0.75 handle. The AUD touched intraday highs at 0.7519 before profit taking forced the commodity currency marginally lower. The Australian dollar has been the best performing major currency through the year thus far buoyed by broader USD weakness. Waning optimism surrounding President Elect Donald Trump' ability to deliver concise pro-growth policies has hampered the USD upward trajectory and a spill over into Thursday trade helped extend AUD upside. With a sense of nervousness creeping into markets USD bulls are looking to correct positions, consolidate existing long positions and take profits. With little local data on hand throughout trade today attentions again turn to US sanguinity and a heavy macroeconomic docket for direction into the weekend.

Great British Pound

GBP / AUD

Expected Range

1.6025 – 1.6425

The Great British Pound has once again suffered under heavy selling pressures as markets reversed early gains through trade on Thursday. The GBP moved through 1.23 to touch intraday highs at 1.2315 buoyed by broad based USD weakness before escalating Brexit fears forced the beleaguered unit back below 1.22 to 1.2150. Investors are wary of extending upside gains as the threat of a hard Brexit from Europe looms ever larger. Having slipped below 1.21 for the first time since October earlier this week the door to deeper downward corrections has been opened and a consolidated move and close below this key resistance point could trigger a run below 1.20. With a dearth domestic economic docket limiting macroeconomic influence attentions today remain ongoing Brexit developments with key US data sets and waning Trump optimism guiding direction.

Majors

USD, EUR, JPY

Expected Range

N/A

The US Dollar sell off continued through trade on Thursday as optimism surrounding President Elect Donald Trump begins to wane. The Dollar fell to five week lows suffering losses against a basket of major currency counterparts moving through 114 JPY to touch session lows at 113.80 while the Euro rallied through 1.06 and 1.0650 to touch intraday highs at 1.0680. Investor' disappointment over Trump' failure to offer any insight into his plans for tax reform, fiscal stimulus and deregulation left investors wanting and questioning whether the Republican president would push through the pro-growth campaigns promised along the election trail. The lack of policy detail encouraged investors to look to safety plays and other high yielding asset classes compounding the recent USD sell off. Attentions now turn to a heavy macroeconomic docket and continued swings in optimism for direction through trade on Friday.

New Zealand Dollar

NZD / USD

Expected Range

0.7030 – 0.7190

The New Zealand dollar rallied through trade on Thursday surging through 0.71 U.S cents as broader Greenback weakness forced investors to correct USD holdings. With little domestic data on hand to drive direction the Kiwi took advantage of waning optimism surrounding President Elect Donald Trump and his ability to deliver pro-growth policies when in office. Touching intraday highs at 0.7144 the NZD has broken through key resistance at 0.7030 and 0.7133. A consolidated push above 0.7130 could open moves toward 0.7190 and 0.7200 as attentions turn to a heavy U.S macroeconomic docket and continued fluctuations in optimism for direction through trade on Friday.

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