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AUD / USD
0.7380 – 0.7480
The Australian dollar moved higher into the weekly close on Friday as investors took advantage of a softer than anticipate U.S jobs report and pushed the commodity driven unit back through 0.74 U.S. cents. Having touched intraday lows at 0.7374 the AUD rebounded bouncing to session highs at 0.7443 as grim U.S macroeconomic data forced investors to revisit their expectations for multiple rate hikes in half two of 2017. The Aussie has remained largely range bound through the last fortnight bouncing between support at 0.7380 and resistance on approach to 0.7480/0.75. Attentions this week turn to the RBA and tomorrow monetary policy statement. We anticipate the board to maintain its current neutral policy stance with rates to hold at 1.5%.
Great British Pound
GBP / AUD
1.7150 - 1.7450
The Great British Pound offered little to excite investors through trade on Friday bouncing within a relatively tight 50 point range for much of the day. With little macroeconomic data on hand and a break in opinion polls investors seemed wary of extending positions ahead of the June 8 General Election. While the Conservatives are still pegged to retain government variances in polling suggest a swing in the majority which could have a wider impact on Brexit negotiations and medium term direction. Opening sharply lower following the horrific events at the weekend with London again besieged by terror attacks attentions turn Thursday' election for direction and guidance. We are watching resistance at 1.2960/1.30 and support at 1.2780 in the lead up.
USD, EUR, JPY
The U.S Dollar touched a new low under the Trump Presidency after a softer than anticipated non-farm payroll print forced investors to recalibrate monetary policy expectations. The monthly Job' report showed fewer than expected new jobs added to the economy in May while average hourly earnings and wage growth were largely unchanged and data for March and April were revised lower. The slowdown suggests perhaps a shift in labour market momentum and while we still anticipate the Fed will raise rates later this month expectations for additional rate hikes later in the year are waning. The dollar slipped below 110.50 against the Japanese yen while the Euro edged nearer 1.13 touching intraday highs at 1.1280. Attentions now turn to revised labour costs and services data for direction through trade on Monday ahead of ECB rate announcement and commentary. A hawkish Draghi and ECB could prompt additional Euro gains as the market is currently leant toward a controlled and perhaps dovish statement continued accommodative monetary policy.
New Zealand Dollar
NZD / USD
0.7080 - 0.7180
The New Zealand dollar' upward momentum continued through trade on Friday following weaker than expected U.S labour market data. The NZD surged through resistance at 0.71 to touch intraday day and two month highs at 0.7142 after May' non-farm payroll report showed a step decline in the number of new jobs added to the US economy. Further adding to the Greenbacks woes was a downward revision to March and April numbers suggesting labour market momentum is waning and that the recent slowdown may be more than just a seasonal correction. With resistance countering moves toward and through 0.7150 investors will be keenly attuned to macroeconomic data sets over the coming weeks as markers for a potential shift in Fed policy and the catalysts for additional Kiwi upside.
0.7300 – 0.7400
The Australian Dollar sell off continued through trade on Thursday as the commodity driven unit eased back below 0.74 U.S cents. Having touched intraday highs at 0.7453 following stronger than anticipated retail sales growth the Aussie plunged as iron ore prices moved lower and expectations for growth throughout the first 6 months of 2017 waned. Testing support the AUD dipped lower still, despite an uptick in oil prices, as a string of stronger than expected U.S macroeconomic data sets and an uptick in US equities helped fuel support for the USD. Preliminary non-farm payroll numbers and manufacturing improved throughout May forcing the Australian dollar to touch intraday lows at 0.7373. Attentions now turn to critical U.S wage growth and labour market data as directional markers into the weekly close.
1.7300 - 1.7600
The Great British Pound enjoyed a relatively quiet trading session Thursday free from the wide variants seen throughout the past fortnight as the correlation with election expectations eased. Sterling bounced off intraday lows at 1.2830 to touch session highs at 1.2910 on steady growth across manufacturing sectors. As investors attentions turn to next week' general election ongoing opinion polls will likely influence direction with analysts reluctant to commit to either side of trades while the wider race remains so broadly open.
The US Dollar was stronger overnight following strong leads from a number of domestic macro releases. The U.S. ADP Non-Farm Employment report showed a gain of 253,000 jobs, and a positive number on Manufacturing PMI as the industry continues at a solid pace of expansion. Despite a rise in US jobless claims for the month, the DXY was higher by 0.25% and advanced through 97.00. Interest rate futures have climbed to a 96% chance of a hike in the lead up to next months Fed Reserve meeting, as Fed Governor Powell overnight has continued to support hikes this year despite waning inflation. EUR/USD pulled back on general greenback strength but remains firmly above the 1.1200 handle. Top ranking officials in Germany have urged the ECB to start reducing its current monetary stimulus ahead of June 8th meeting with a possibility of easing bias tones removed. USD/JPY has paired yesterday' losses, squaring up to 111.40 ahead of Non-Farm Employment data this evening.
The New Zealand Dollar is weaker this morning when traded against its US counterpart. The Kiwi hit a 24-hours low of 1.0434 on the back of a stronger US labour market. Overnight in the US the ADP Non-Farm employment survey showed 253,000 jobs were added in May, compared to a forecast 174,000, boosting speculation the official non-farm payrolls data tonight will also be strong. The NZD/USD pair is currently trading at 0.7064. We now expect support to hold on moves approaching 0.7015 while any upward push will likely meet resistance around 0.7097. The Kiwi however extended its gains against the Aussie overnight off weaker iron ore prices and a drop in Chinese manufacturing activity. The AUD/NZD pair is currently trading at 1.0441 (0.9577). On the local data front, there are no economic data releases due out today.
0.7400 – 0.7500
Having peaked at 0.7476 in early Asian trade the Australian Dollar drifted lower during yesterday' local session influenced by weaker commodity prices. Crude oil fell nearly 3% on news that Libyan output was recovering which fuelled concerns that the OPEC-led output cuts are being undermined by countries that are excluded from the deal. Iron ore also lower with growing concerns over the outlook for the demand in China. As the European market and US markets opened the Aussie continued to be dragged lower to touch an eventual low of 0.7424. The Aussie is still trending down, with the primary focus for markets today is Private Capital Expenditure as they could provide a clue to the first quarter GDP figures due on June 7, it is expected to rise 0.8% q/q. Retail Sales equally important following two consecutive months of falls in February and March, forecast is a rise by 0.3% m/m in April.
1.7200 - 1.7500
The New Zealand dollar offered little through trade on Wednesday bouncing about a 40-point range having touched intraday highs at 0.7120. With little of note coming from the RBNZ financial stability review the Kiwi continues to butt its head against key technical resistance handles and was the best performing major currency throughout May. A renewed appetite for risk and stability across dairy prices coupled with wider greenback weakness has helped bolster NZD demand, however extended upside gains may slow as resistance at 0.71 encourages profit taking and perhaps signals a marginal downward correction is at hand leading into quarter three. Attentions today turn to U.S preliminary payroll data as a key marker for direction.
Markets were once again light on in volatility in the lead up to the ADP Non-Farm Employment reading this evening. The US dollar saw further drops against a basket of major currencies as the DXY fell 0.32% for the day. The Dollar index ended the month more than 5% lower as hope fades on the Trump administration pro-growth economic policies. Beige Book was released overnight as the US economy expanded at a modest to moderate pace through May with few signs of inflation pressures. Oil was crushed again, falling closing to 3% for the day, hindering any upside movements by so called commodity currencies. Equities remained flat globally. EUR/USD was close to May highs as we saw an intraday high of 1.1250. Euro core inflation came in weaker at 1.4% on an annualised basis, supporting Mario Draghi to keep its current tapering program in action. USD/JPY drifted lower as movements were seen back into the Yen in safe haven bids, moving below the 111.00 handle to a low of 110.50 overnight.
0.7000 - 0.7120
Following yesterday' Australian Building Approvals report the local unit faced some selling pressure and tested short-term support levels near 0.7420 in early morning trade. The data showed a bounce back from March numbers increasing 4.4% vs an expected 3% with a yearly reading of -17.2%. The recovery in the numbers were led by a 9.6% increase in approvals for new apartments and showing more homes are being built than ever. With a heavy supply vs demand in the market economists are expecting to see house prices to ease somewhat. Overnight the AUD/USD pair recouped losses made earlier and strengthened thanks mainly to a weaker Greenback touching a high of 0.7469. The Aussie has notably been pushing lower, if the Aussie remains below resistance of 0.7608 there are some strong downside risks and expected to move back below 0.7400. Attention now focused on tomorrows first quarter Capital Expenditure and Retail Sales data.
1.7000 - 1.7280
Having edged marginally higher through trade on Tuesday the great British Pound moved sharply lower through early trade on Wednesday after pre-election polls suggest the Conservatives may fall short of claiming an overall majority. Sterling plunged back through 1.2850 to immediately test supports at 1.2800. Uncertainty surrounding the election has plagued the Pound through the last week and forced a sharp correction in expectations for future Brexit negotiations. Should Prime Minister May fail to expand the Conservatives majority already difficult Brexit negotiation will become that even more untenable. With little of note on the macroeconomic docket today changes in the political landscape leading into the election will continue to dominate and drive direction. We are watching a break below 1.28 before extended moves toward 1.2710 and 1.2620.
The US dollar has weakened across the board as major markets ramped up flows from long weekend holidays. The U.S. Dollar Index (DXY) is down 0.25% for the day as United States CB consumer confidence dropped to its weakest number since February as “Good” business conditions edged lower. Dallas Fed President Robert Kaplan has further supported two more interest rate hikes this year in an interview with CNBC overnight as he sees growth in the 2-3% region. The current CME Fedwatch tool shows a 89% chance that a 25bps interest rate increase will occur at the June Fed meeting. Both equities and commodities traded flat with 10-year treasury yields down 3bps to 2.21%. Despite being hit by low inflation reading as in Germany and Spain, the EUR/USD advanced to the 1.12 handle after a late dollar selloff with further cues to come out of the European region this evening as core inflation and the jobless rate takes focus. Yen strengthened yesterday on safe haven bids along with a strong retail sales boost. The Japanese unemployment rate was steady as the USD/JPY cross moved to a two-week low of 110.70 overnight.
0.7050 - 0.7150
The New Zealand Dollar advanced overnight against its US counterpart reaching a fresh high of 0.7101, it' the first time the Kiwi has traded above 0.71 US cents since early March. The US core PCE price Index rose 0.2 per cent in April, above market expectations but the lowest annual inflation in about 18 months. Locally yesterday Building consents for new homes fell in April, partly due to the timing of Easter. The seasonally adjusted number of new homes fell by 7.6 percent in April compared with the previous month. Well below market expectations. Today attentions turn to ANZ's business confidence survey for the month of May. The NZD/USD pair is currently trading at 0.7091.
The Australian Dollar barely moved yesterday, with markets in the U.S, the U.K and China closed observing public holidays the local unit has been confined between a low of 0.7426 and a high of 0.7450. Markets ignored news of a third missile test within three weeks by North Korea which landed in the sea between Korea and Japan. With recent local economic indicators being mixed it has raised some concerns on the strength of the Australian economy and therefore all eyes will be closely watching Building Approvals due out later this morning. The forecast is to rise by 3% in April following a large drop on 13.4% in March. On the technical side, the charts are indicating a lower trend, if the pair holds above 0.7423, the near-term resistance sits at 0.7484. However, failing this the pair could grind lower to 0.7400.
1.7200 - 1.7300
The Great British Pound steadied through trade on Monday having found support following Fridays bout of heavy selling. As most Britons enjoyed an extended weekend in observance of the Spring Bank Holiday volumes remained thin yet with little macroeconomic data to drive direction volatility did little influence traders and Sterling edged marginally higher. Weekend polls showed Prime Minister May will win next week' election however concessions will need to be made amongst those expecting a landslide victory. The trend through the past two weeks has seen the Conservatives lead narrowed and while the Prime Minister can be confident in returning to Downing street the majority she hoped to gain in the house and commons is unlikely to eventuate making Brexit negotiations that much harder. Attentions today remain with electoral expectations for direction as the macroeconomic docket remains free of headline data sets.
It was a light on trading day for the start of the week as United States, United Kingdom and China all observed public holidays. On low liquidity, there was little movement on currency markets as the US Dollar index saw one of its tightest trading range this year and up 0.05% for the day. This week sees key macroeconomic data out of the United States with CB Consumer spending this evening. On Friday Non-Farm Employment is released for May, which could give further influence to the Feds upcoming monetary decision in June. Fed reserve member John Williams reconfirmed his view in his speech yesterday in Singapore that three interest rate hikes currently makes sense for the US economy. EUR/USD was steady overnight hitting an intraday high of 1.1190 before news out of German press – Bild early this morning without citing sources, that the Greek government is possibility looking to go without bailout payment should creditors not agree on debt relief. This sent the cross immediately lower to 1.1135. USD/JPY was steady overnight and sits at 111.20 ahead of Japanese retail sales and its unemployment rate released this morning for the month of April.
0.7000 - 0.7100
With the bank holiday in the US yesterday trading was relatively subdued. The New Zealand Dollar opened slightly weaker when values against its US counterpart currently trading at 0.7044. We now expect support to hold on moves approaching 0.7015 while any upward push will likely meet resistance around 0.7097. The Kiwi touched a three-week high against the euro overnight after European Central Bank President Mario Draghi said the European region still requires more stimulatory monetary policy. The NZD/EUR currency pair is currently trading at 0.6326. On the economic data front, today all eyes will be on Building Consents for the month of April. It's a leading gauge of future construction activity.
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