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AUD / USD
The Australian Dollar moved higher against its US counterpart yesterday reaching a top of 0.7631. The lift in the Aussie followed stronger than expected labour market data. In May, the unemployment rate fell to 5.5% beating expectations of 5.7%. A drop in the wider unemployment rate and better than anticipated upturn in new jobs created (42,000 new jobs in May) have enabled the AUD to extend through the 0.76 mark, touching its highest level in 2 months. The AUD/USD pair is currently trading at 0.7581. We now expect support to hold on moves approaching 0.7560 while any upward push will likely meet resistance around 0.7630.
Great British Pound
GBP / AUD
Losses on the Great British Pound yesterday were clawed back as the BoE kept their interest rates at record lows and maintained their asset purchasing program. Despite trading steady at 1.2750 in early morning trading in the UK, Sterling drifted to an intraday low of 1.2690 in the lead up to the release of the UK official bank rate as UK retail sales disappointed. Surprising the markets was not a hold on rates but the 5-3 vote count by MPC members whereby it was expected the count would be 7-1. Market expectations were not expecting such hawkish behaviour by members Michael Saunders and Ian McCafferty, joining Kristin Forbes in their attempt to start raising rates sooner. With a high inflation reading this week and the potential to go higher this year, there is now a 50% probability of a hike by the BoE before the end of 2018. Cable shot up immediately to the daily high of 1.2790 before drifting lower at the close of the North American trading session and opens this morning square at 1.2750. The British Pound also opens higher against the Australian dollar at 1.6825 and New Zealand Dollar – 1.7700.
USD, EUR, JPY
The Greenback outweighed the Euro during Thursdays day of trade as markets continued to digest the Federal Reserve policy announcement which to many' surprise had a slight of a hawkish tone. Investors weighed up the prospects of a further rate hikes this year with December in sight for the third, longer-term US dollar strength could be in the pipeline after quite some time. On the data front, the EU recorded a €17.9bn surplus in trade in goods with the rest of the world compared with €145.9bn for April 2016, the figures has little impact to the pair. The US dollar extended its gains in the New York session with a raft of upbeat data out of the States. New York Manufacturing Index jumped sharply to its highest level in three-years to 19.8, Initial Jobless Claims fells for the week ending June 10th from 245k to 237k which continue to signal healthy labour markets. The stronger US Dollar has weighed on the many commodity prices as well with both oil and gold lower.
New Zealand Dollar
NZD / USD
0.7120 – 0.7310
The New Zealand Dollar edged marginally lower through trade on Thursday sinking back below 0.7250 after a softer than expected quarterly GDP print. The domestic economy expanded at a slower pace than analysts predicted growing just 0.5% through the first 3 months of 2017. Losses were further compounded as the Greenback found momentum in the Fed' upbeat commentary and a stronger USD forced the Kiwi toward intraday lows at 0.7187. Having enjoyed strong gains throughout the last month the NZD is perhaps now due for a correction and a consolidated move back toward 0.71 and 0.70 are possible through the short to medium term. Attentions now turn to local manufacturing data for direction into the weekend.
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.
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.
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.
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.
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