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AUD / USD
The Australian Dollar Enjoyed mixed fortunes throughout the global session yesterday enjoying gains domestically before suffering a downward correction throughout early European trade. The AUD/USD pair touched a high of 0.7624 and a low of 0.7566 and once again the 0.7630 handle is proving to be a somewhat strong resistance level. Domestically we saw the release of the RBA' Monetary Policy Meeting Minutes from its June meeting where the central bank signalled some optimism about the state of the economy. While wage and inflation pressures remain a point of concern so too does the housing market, markets will now shift their focus on the RBA and when they will start lifting rates.
Great British Pound
GBP / AUD
The Great British Pound suffered key losses through trade on Tuesday touching two month lows, breaching the 100 day moving average and opening up possible moves toward and through 1.2550 and 1.25. Investors reversed gains enjoyed in the wake of last week' Bank of England monetary policy meeting after Governor Carney reiterated the MPC' commitment to accommodative policy, saying “this was not the time to raise rates”. Sterling moved through 1.2650 as additional downward pressures followed suggestions Standard and Poors would downgrade the U. K' Credit Rating pending the outcome or Brexit negotiations. As both political and economic uncertainty loom over the British Isle the hard fought gain enjoyed through April and May could well face a correction and a move back below the 1.25 handle.
USD, EUR, JPY
The U.S dollar enjoyed a second consecutive daily advance through trade on Tuesday touching three week highs against both the Yen and the Euro while pushing higher against commodity driven units as crude oil prices entered new bearish channels. Buoyed by a continued stream of hawkish FOMC and Fed commentary the greenback edged toward 112 JPY before stalling amid key technical resistance and the 100 day moving average at 111.85 while the Euro broke supports at 1.1130/40 touching intraday lows at 1.1119. Investors now seem to be catching up with the Fed' hawkish outlook and we are seeing a possible shift in momentum falling a period of heavy selling. If macroeconomic indicators being to offer broader improvements and wage growth forces an uptick in inflationary pressures, then we can expect wider USD gains as we analyst look to monetary policy normalisation for direction. Attentions today turn to crude oil inventories as the primary item on the domestic docket while broader risk sentiment will govern flows into next weeks all important GDP print.
New Zealand Dollar
NZD / USD
0.7150 – 0.7320
The New Zealand Dollar opened yesterday at support levels of 0.7220 and advanced higher in the local session to an intraday high of 0.7265. The latest GlobalDairyTrade Price Index overnight declined for the first time in four months by 0.8% after a previous gain of 0.6%. The Kiwi slipped to 0.7230 against the US dollar after the release, the main reading of whole milk powder prices dropped 3.3%. Despite the limited movements, markets expects a boost in volatility in the lead up to tomorrow mornings RBNZ monetary policy meeting. While it is expected that interest rates remain on hold at 1.75%, the market is currently pricing at a 50% chance of a hike by May 2018. The NZD/USD opens at 0.7240.
The Australian Dollar opens fractionally lower bouncing around levels of 76c against the U.S dollar as New York Fed president Dudley reinforced expectations of further increases in interest rates. He noted that inflation was a little lower than what they would like but if the labour market continues to tighten, wages will gradually pick up and with that inflation will gradually get back to their targeted 2 percent. Locally, in Canberra yesterday, the RBA governor Phillip Lowe said that over the next couple of years Australian economic growth will “be a bit stronger than it has been recently” also noting that “as things currently stand, it looks likely that average growth in per capita incomes over the next quarter of a century will be lower than over the past quarter of a century. We should, though, be capable of stronger growth than we have seen over the past few years”, the Governor was optimistic on the global economy with 2017 seeing some improvement overall still adding there are still some risks. The AUD/USD pair currently buying 0.7599 against the Greenback with 0.7630 still seen as strong resistance.
1.6675 – 1.6875
The Great British Pound started the session strong against the US Dollar reaching a high of 1.2814 before fading after the official start of Brexit negotiations in Brussels. It has now been a full year since the Brexit referendum. The UK's David Davis and the EU' chief Brexit negotiator Michel Barnier slammed the door on any prospect of a “soft” Brexit. Michel Barnier also said he was "not in the frame of mind to make concessions or ask for concessions". As a result, the GBP/USD pair fell to an overnight low of 1.2723. The Pound is currently trading at 1.2769. We now expect support to hold on moves approaching 1.2710 while any upward push will likely meet resistance around 1.2760.
The U.S Dollar edged marginally higher through trade on Monday buoyed by ongoing and upbeat commentary from the FOMC and key Fed officials. New York Fed President William Dudley reiterated the Fed' commitment to tighter monetary policy suggesting the open market committee still believes the labour market will fuel an uptick in inflation and allow the Fed to raise rates again before the end of the year. The hawkish tone renewed demand for the worlds base currency and drove a rally through 111.50 JPY. The USD touched a two week high against the Yen as analyst compare Central Bank Monetary policy outlooks and comments from BoJ President Kuroda who last week made clear the BoJ' commitment to its current stimulus plan. As the focus turns again to central bank policy expectations attentions today will be governed by commentary from FOMC members Fischer and Kaplan for wider direction.
0.7180 – 0.7280
The New Zealand Dollar opened the week at 0.7250 and failed in its attempt to break through 0.73 once again. Rallying early in Monday mornings Asian session after strong Westpac consumer confidence, the Kiwi gained some 50 pips against the U.S. Dollar. Profit taking resumed as the NZD/USD cross paired all gains heading into offshore sessions as an upbeat FOMC member William Dudley drove the U.S. dollar higher in overnight trading. NZD/JPY hit three month highs yesterday of 81.00 as the New Zealand dollar takes further direction from the GlobalDairyTrade Auction this evening, opening lower this morning at 0.7220.
The Australian Dollar has closed the week a cent higher above 76 cents when valued against its US counterpart. Having seesawed through the week on the back of the Federal Reserve meeting, the Aussie has gained traction and is currently buying .7620 at the time of writing. With little to none macroeconomic data to focus on, the local unit looked offshore for direction on Friday which came mostly out of the United States. Dampening optimism over the US economy with U.S consumer sentiment figures declining in May as well as U.S homebuilding numbers falling for a third straight month gave the Aussie a boost. The RBA governor is due to speak this morning which is followed by New Motor Vehicle Sales and CB Leading Index.
The Great British Pound opened this morning slightly higher against the US Dollar on the back of soft US data during Friday' session. Looking ahead this week and all attentions will be on the start of Brexit negotiations today. Since Prime Minister Theresa May failed to secure a majority government in the recent UK elections it seems the EU will set the terms. The key issues will include the size of a "divorce" bill, how the U.K. will trade with the EU once it leaves, and the status of EU nationals and Britons living in the EU. The GBP/USD pair is currently trading at 1.2769. We now expect support to hold on moves approaching 1.2750 while any upward push will likely meet resistance around 1.2790.
The U.S Dollar moved lower through trade on Friday giving up gains earned in the wake of the FOMC' upbeat and hawkish economic assessment to touch near 8 month lows. Weaker than expected consumer sentiment and housing data heightened concerns wider economic growth is stagnating and with little progress coming in the form of promised fiscal reforms from the Trump administration the disconnect between markets and the Fed appears to be growing wider. The Euro moved back through 1.12 to touch intraday highs at 1.1207. The dollar moved back through 111 JPY having earlier touched two weeks’ lows after a dour BoJ commentary. Central Bank Governor Kuroda emphasised the need for ongoing stimulus to correct the gap between real and target inflation disappointing some market analysts who envisaged a winding down in stimulus programs. With little domestic data on hand today direction will be derived from wider risk flows as demand for U.S equities wanes and bearish sentiment remains intact.
0.7220 – 0.7320
The New Zealand Dollar had a strong week, rallying through March highs to 0.7316. Finding quite strong resistance at these levels, the Kiwi was not able to maintain these heights and saw all gains paired on Thursday evening to a low of 0.7180, after a lower than expected NZ GDP print for the quarter. Hopes were boosted on Friday morning as NZ Manufacturing activity expanded for the month of May, reaching its highest level since January 2016. A soft lead from United States consumer confidence nudged the NZD/USD cross higher to finish up 0.6% for the day. Further movements this week will be dictated by the latest GlobalDairyTrade Auction out on Wednesday, along with the RBNZ' interest rate decision on Thursday where it is expected interest rates will remain on hold at the benchmark rate of 1.75%. The New Zealand dollar opens at 0.7250 this morning.
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.
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.
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.
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.
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