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AUD / USD
The Australian dollar rallied overnight to a 2-month high of 0.7635 against the US Dollar. The US Federal Reserve raised interest rates by 25 basis points to a range of 1% to 1.25%, a level it hadn’t reached since the Global Financial Crisis. Looking ahead today, all attentions turn to May employment figures at 11.30am AEST with the expectations the unemployment rate will to remain steady at 5.7% and 10,000 new jobs added in the month. The AUD/USD pair is currently trading at 0.7585. We now expect support to hold on moves approaching 0.7550 while any upward push will likely meet resistance around 0.7600.
Great British Pound
GBP / AUD
1.6700 – 1.6950
The cable retracted it' gains yesterday to trade this morning at 1.2749 following a high of 1.2815 during the US trading session. The Fed' Chairwoman Janet Yellen took the wind out of the Sterling' sails by presenting a hawkish tone in the FOMC statement. Despite this setback the GBP shows signs of recovering from the election with the possibility of a ‘softer’ Brexit, an element in the support for the GBP. On the domestic front all eyes now turn to the Bank of England' Policy Summary as the surprising inflation rate growth earlier in the week may prompt a hawkish undertone. Against the AUD, the Sterling has remained relatively stable treading water at 1.68. The GBP/AUD cross turns to the Australian unemployment rate and the Bank Of England' releases for further direction.
USD, EUR, JPY
In the overnight session the Euro leaped to its highest level in more than eight months against the Greenback touching levels of 1.1294 against the U.S Dollar. Weaker than expected economic data out of the US caused the immediate rally, Retail Sales fell last month by 0.3% and May Inflation data showed a decline in headline CPI by 0.1% and weaker than-expected core CPI down 0.3%. The main source of deflation is coming from used vehicles, new vehicles and apparel. Pretty much all gains were reversed as the US Federal Reserve raised interest rates by 25 basis points from 1% to 1.25% - the third consecutive quarterly increase. The Fed mentioned in their statement that the labour market continues to strengthen and that economic activity has been rising moderately so far this year. Also, plans to unwind its enormous bond portfolio bought as part of its bid to restart the US economy after the recession. Questions now turn if this will be the last hike for a while until we see a reversal of recent weakness in inflation and retails sales.
New Zealand Dollar
NZD / USD
0.7200 – 0.7330
The New Zealand dollar enjoyed mixed fortunes through trade on Wednesday enjoying strong gains before paring early advances and closing the day only marginally higher. Having edged upward throughout domestic trade the Kiwi surged through 0.7250 and 0.73 following softer than expected U.S retail sales and month on month inflation data as investors rushed to correct positions ahead of the Federal Reserve' monetary policy statement and rate announcement. Touching intraday and 3 month highs at 0.7319 the NZD then gave up gains and moved sharply lower in the wake of Fed commentary. The open market and rate setting committee' hawkish undertone and upbeat assessment helped the greenback claw back losses and forced the NZD back below 0.7250 as investors adjust their expectations as to the timing and pace of monetary policy normalisation. Attentions now turn to this morning' Domestic GDP data as a marker for further direction. A strong read could encourage another assault on resistance at 0.73/7320 while a soft read will likely consolidate the correction and push the NZD back toward the 0.71 handle.
0.7490 – 0.7590
The Australian dollar opens this morning little changed when valued against its US Counterpart at 0.7536. A fairly quiet session yesterday on the macroeconomic data front saw the Aussie trade within a 40-pip range (0.7564 – 0.7524) against the greenback. National Australia Bank's monthly business survey, the only scheduled release yesterday, showed a fall in confidence from +13 to +7 index points in the month of May. Despite the drop-in business confidence, the business sector is looking quite upbeat. Looking ahead today and at 10.30am AEST will see the release of Westpac' monthly consumer confidence index. The AUD/USD pair is currently trading at 0.7533. We now expect support to hold on moves approaching 0.7500 while any upward push will likely meet resistance around 0.7565.
1.6700 – 1.7000
Short term relief has been found for the Great British Pound overnight as it attempts to recover from its recent trough caused by Theresa May's snap election. Starting the day 1.2660, Cable recovered from two month lows to 1.2750 overnight as UK inflation figures for the month of May rose to 2.9%. The lower Sterling of late continues to impact the price of imports as core components such as consumer goods and packaged holidays were the main causes for the increase. Despite hitting near four-year inflation highs, the Bank of England has previously stated it is not concerned with current levels of inflation above its targeted band of 2% inflation, as economists predict it could be close to peaking mid-year. In Theresa Mays meeting with Macron overnight it was made clear that Brexit negotiations remain on track despite current political instability. Sterling opens steady this morning against the US Dollar at 1.2750. The Great British Pound is also higher against the Australian dollar 1.6925 and Kiwi 1.7660.
The Euro was almost unchanged against the U.S Dollar currently changing hands at 1.1210 at the time of writing. The pair did initially edge lower in the Asian session but recovered in European trade moving between levels of 1.1185 and 1.1225 as investors eagerly await the interest rate decision by the US Federal Reserve which is due to be released at 4am Australian Eastern Standard time. On the data front German ZEW Economic Sentiment dropped unexpectedly in June to 18.6 points from 20.6 in May which is below the indicator' long-term average of 23.9. In the US, PPI figures releases were unchanged in May, meeting consensus expectations. The flat result reflected a fall in gasoline prices, while services prices increased. The Core price which excludes food and energy increased 0.3% being higher that expectations, PPI is considered to be a leading indicator of inflation for the Federal Reserve.
0.7160 – 0.7260
The New Zealand dollar touched three and a half month highs through trade on Tuesday, breaking back through 0.72 U.S and touching intraday highs at 0.7228. Buoyed by wider USD weakness investors continued to push the current NZD upturn ahead of today' Federal Reserve and FOMC monetary policy statement. Analyst anticipate the Fed will raise the benchmark cash rate, meaning investors focus will be largely drawn to the commentary that accompanies the rate announcement and signals relating to policy normalisation. Any hint the Fed plans to trim its balance sheet before the end of the year will force a reshuffle in expectations. With resistance forming on moves toward 0.7245/50 and 0.7290/7300 investors will need a distinctly dovish statement to drive further NZD upside, while a hawkish and aggressive appraisal of future monetary policy could spark a USD recovery and force the NZD back toward supports at 0.7130/0.7100.
The Australian dollar advanced against the US Dollar on Monday trading a 24-hour high of 0.7546. Yesterday was a public holiday in Australia (except QLD and WA) celebrating the Queen' Birthday. Therefore there were no scheduled macroeconomic data releases yesterday. Looking ahead today at 11.30am AEST will see the release of NAB Business Confidence for the month of May. The AUD/USD pair is currently trading at 0.7539. We now expect support to hold on moves approaching 0.7500 while any upward push will likely meet resistance around 0.7565.
1.6650 – 1.6850
The Great British Pound remains under pressure as the fallout from the UK Election continues. As Prime Minister Theresa May continues to try and form a majority government, selling of the Sterling resumed overnight from intraday highs of 1.2770 on close of the Asian trading session. With no agreement as of yet with the conservative Irish party – DUP, we saw cable fall 1% to as low as 1.2640 in overnight trading and 2.5% since the start of the election. As Theresa May' position weighs in balance, the market turns its attention to this month' UK inflation reading which is expected to remain steady at the annualised rate of 2.7% for the month of May. The British Pound opens this morning at 1.2670 against the Greenback. It is also lower against the Australian dollar – 1.6800 and New Zealand dollar of 1.7580.
It was mostly a quiet session overnight given the lack of any top tier macroeconomic data. The EUR/USD pair moved above 1.12 early in the session and touched a high of 1.1232 after the French President Macron looks to take an overwhelming majority in parliament after first round elections held on Sunday. The Greenback is holding steady ahead of Wednesday' interest rate decision, it is widely expected the Fed will raise rates by 25 basis points and investors will be closely watching for indications on the pace of further tightening in their statement release. Meanwhile in Japan, Core Machine Orders fell more than expected, the drop came in at 3.1% in April vs an estimate for a 0.5% gain. USD/JPY reacted very little to the data.
0.7140 – 0.7240
With world-wide macro-economic events contributing to a general indecisive market, The NZD trades this morning within a narrow, 15 pip range around the 0.72 level. We did see a large 20 pip drop at the end of the Asian session but the Kiwi regained its losses on open of the European session. The Kiwi appears to be treading water ahead of a number of key data releases in the US, with the FOMC and NZ GDP both expected on Thursday morning. Over in the UK, the NZD/GBP has risen considerably since the UK election but has reversed some of these gains and currently trades at 0.5685. Across the Tasman, the Australian holiday yesterday led to a quiet local market with the NZD/AUD currently trading at 0.9550.
0.7500 – 0.7650
The Australian dollar rally this week eventually abated after strong movements above the 0.75 handle this week. Opening at middle ground of 0.7550 on Thursday, the release of Trade Balance figures was the catalyst for Aussie dollar downside progression to intraday lows of 0.7525. Trade balance figures showed a surplus of $555m for the month of April, sharply down from the previous month surplus, with a slump in coal exports the main driver. AUD/USD cross moved sideways for the majority of the session as U.K. elections took focus by major markets around the world. Despite climbing back to an overnight high of 0.7550, movements were seen back into the Greenback as exit polls in the UK start filtering through to the market. The AUD/GBP cross is the major mover of the day up 1.3% on writing to 0.5890. The Australian Dollar moved lower immediately this morning by twenty-five pips to 0.7525 against its US counterpart as we expect heightened volatility in the lead up to results in the UK general election.
1.6800 - 1.7200
The Great British Pound traded flat for the first half of yesterday' session until the beginning of European trade where the Sterling came under some selling pressure against the US Dollar. The GBP/USD moved from levels of 1.2977 down towards 1.2908 as traders squared out of long positions ahead of the UK election. The polls have now closed and as we open this morning in Australasia the pair has gapped considerably lower buying 1.2745 at the time of writing after a shock exit poll suggesting the Tories will fail to win a majority. GBP/AUD also lower buying 1.6950 and against the New Zealand Dollar 1.7785 . Markets will be closely watching the results as they unfold live throughout the day, will Theresa May and the Conservative Party continue to lead the UK or will Jeremy Corbyn and the Labour Party pull off a surprise. In other news, a raft of economic releases are due starting with UK Manufacturing Production and Goods Trade Balance.
Overnight in the US, the greenback moved slightly higher after former FBI Director James Comey gave his testimony to a Senate Committee raising questions about whether US President Donald Trump obstructed justice in his interactions with the former FBI director. In the Eurozone, the European Central Bank left its benchmark interest rate unchanged at 0.00%. The message from ECB president Mario Draghi was that the risks are still ’tilted to the downside’. The EUR/USD pair is currency trading at 1.1205. We now expect support to hold on moves approaching 1.1170 while any upward push will likely meet resistance around 1.1250. The US Dollar advanced for the second consecutive day against the Japanese Yen. The USD/JPY reached an overnight high of 110.38 and is currently trading at 110.06.
0.7100 - 0.7250
The NZD shrugged off macro-economic events overnight to break through 0.72 and reach a high of 0.7222. Currently trading at 0.72, the Kiwi' slow grind upwards continues to outperform despite a lack of strong momentum and global risk events. The Kiwi now turns to a loaded US economic data docket for further direction. Over in Australia, the Aussie continues to hold its gains against the USD ultimately leaving the NZD/AUD rate at a steady 0.9550 this morning. All eyes now turn to the on-going UK election with a surprise result plausible. With the exit polls signalling a potential hung parliament, the NZD/GBP currently trades at 0.562.
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