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AUD / USD
0.7650 – 0.7730
The Australian dollar held a tight range throughout much of Friday struggling to break a 35 point trading band. With little domestic data on hand to drive direction investors appeared reluctant to push key technical resistance points and extend gains beyond 0.77. Having rallied strongly midweek in the wake of the Federal Reserve' dour interest rate outlook the Aussie upturn stalled on moves approaching 0.7730 and wrestled with moves nearing 0.77 U.S Cents. Despite the midweek bounce market participants seemed disinclined to extend upside advances through the medium term with central bank yields expected to narrow throughout the year. While the Fed failed to back calls for three to four interest rate amendments through 2017 there is still an expectation the FOMC will move to tighten monetary policy further and when contrast against the RBA' neutral monetary policy stance the attractiveness of the AUD as a higher yielding unit begins to diminish. Attentions this week turn to tomorrow' RBA meeting minutes for further insight into wider monetary policy expectations.
Great British Pound
GBP / AUD
1.5930 - 1.6150
The Great British Pound maintained its upward trajectory since the Bank of England kept interest rates on hold Thursday evening. In another central bank twist similar to the ECB, one policy maker Kristin Forbes renown for being hawkish voted for a rate hike and caught the market by surprise. Noting a focus on rising inflation in the BOE minutes, local investors turn its attention to inflation figures for the month of February out on Tuesday 21st at 9:30 GMT. The cable cross has seen higher highs each subsequent day, rallying from 1.2160 to a high of 1.24 not seen since March 1st on the weekly close. GBP/USD opens this morning at 1.2380.
USD, EUR, JPY
The U.S Dollar suffered one of its worst weekly performances since July last year in the wake of the FOMC and Federal Reserve' cautiously optimistic commentary last week with Bloomberg' spot index touching November low. Despite raising rates the Fed failed to deliver the hawkish assessment sought after by market participants and a rapid unwinding of USD longs forced the world' base currency lower. Loses were further compounded following victory for Centrist Mark Rutte and his VVD party in the highly anticipated Dutch Election. The win and comprehensive defeat of Nationalist Gert Wilder' goes a long way in easing perceived political instability across Europe and narrows the chances of French far right candidate Marine Le Pen. The Euro held touched intraday highs at 1.0783 and despite edging marginally into the close held onto gains above 1.07. With little of note on today' domestic docket attentions this week turn to mid-level data through the first half of the week with commentary from Fed Chair Janet Yellen steering direction into the close.
New Zealand Dollar
NZD / USD
0.6975 - 0.7050
The New Zealand dollar traded in a tight fifty-point range to end a busy week for currency markets. The NZD rallied earlier in the week to a high of 0.7050 against the US Dollar as market participants were left disappointed with no change to the so called “dot plot” and the US Federal Reserve hiking interest rates for only the third time since the GFC. Testing 0.7000 intraday, the New Zealand rallied to a high of 0.7040 and opens this morning at 0.7010. An early release of Westpac consumer sentiment saw a decline for the first quarter although had little impact on the local currency. On the docket this week is the only central bank meeting this week on Thursday as the RBNZ expects to keep their official cash rate on hold at 1.75%
0.7600 – 0.7715
The Australian dollar' advance stalled through trade on Thursday as the commodity driven unit gave up moves above 0.77 to edge marginally lower into the daily close. Having rallied sharply in the wake of the Fed' somewhat dovish post rate hike commentary investors looked to square positions and the Aussie again met resistance on rallies approaching 0.7730. An uptick in the overall unemployment rate and a surprise reduction in the number of new roles added to the economy forced investors to square positions and the Aussie edged lower throughout the day touching intraday lows at 0.7665. As the market absorbs the Fed commentary there is scope for short term AUD upside and a renewed period of trade between 0.7630 and 0.7730. Attentions today turn to a relatively quiet domestic docket with headline U.S consumer sentiment driving direction into the weekly close.
1.5975 – 1.6200
The Great British Pound extended gains through trade on Thursday advancing through 1.23 to touch intraday highs at 1.2376. Sterling found support following the Bank of England' monthly monetary policy meeting and a suggestion the MPC (monetary policy committee) may look to raise interest rates sooner than expected. The accompanying minutes and summary of member votes allude to a possible shift in sentiment within the board and sparked expectations a shift away from the highly accommodative interest rate platform may be closer than previously thought. Having advanced 250 points in the two days following the Fed and FOMC rate hike attentions now turn to CPI inflation and retails sales data as markers for possible interest rate direction.
After a flurry of news over the past 24 hours and a market expecting a hawkish Fed, the USD has seen notable weakness post FOMC statement. Falling yesterday by over 1% for the day, the U.S. Dollar Index (DXY) has continued its sell off by another 0.3% to test 100.20 in early morning trading. The CME Fedwatch tool currently shows a current 50% chance of the next interest rate hike in June. USD/JPY was steady and traded in a narrow range of 113.00 – 113.50 as Bank of Japan kept their interest rates on hold at negative 0.1%, and no changes to their bond holdings purchases of 80 trillion yen annually. EUR/USD has seen a surge on early morning trading from support of 1.07 to 1.0770 as ECB council member Ewald Nowotny hinted the European Central Bank could raise deposit rates before its main refinancing rate in a different manner to the Fed. Further support for the Euro was seen as Dutch Prime Minister Mark Rutte was re-elected with the VVD party into a 3rd term of Government. G20 meetings over the coming days take focus for currency markets.
0.6900 – 0.7050
The New Zealand Dollar has pulled back under the psychological resistance level of 70c on the back of yesterday' Gross domestic Product having initially rallied following the US Federal Reserve announcement. The GDP number for the previous quarter rose 0.4 percent vs 0.7 percent expectations and following an increase of 0.8 percent in the September quarter. The weakness was mostly due to a heavy rain period in Spring which reduced farm production and exports. On an annual basis the GDP figure grew at 2.7%. This morning sees the release of Business NZ Manufacturing Index which will provide further insight on New Zealand pace of growth. The Kiwi is currently changing hands at 0.9095 against the Australian dollar, a level not witnessed since April 2016.
0.7600 – 0.7750
The Australian Dollar advanced against the US Dollar on Wednesday to its highest level since in two weeks. The AUD/USD pair advanced to an overnight high of 0.7719 amid broad dollar's weakness. As anticipated the FOMC raised rates 0.25 percent, however the FOMC did not flag any plan to accelerate the pace of monetary tightening and that further rate increases would be gradual. Attentions now turn to today' Labour force data for the month of February with market expectations 16k gain in employment which will hold unemployment steady at 5.7%. The AUD/USD pair is currently trading at 0.7706 up 1.92% over the last 24 hours. We now expect support to hold on moves approaching 0.7660 while any upward push will likely meet resistance around 0.7740.
1.5900 – 1.6075
The Great British Pound jumped sharply higher throughout trade on Wednesday buoyed by a Federal Reserve Monetary policy statement that fell short of markets wider expectations. Surging through 1.22 and 1.2250 the GBP found support in investors unwinding positions of misplaced optimism. Much of the market had anticipated the FOMC would raise interest rates and attentions were squarely directed toward the accompanying policy statement as a marker and guideline for additional policy changes. Some market participants had set bets on the Fed raising rates four times throughout 2017, those bets were however quashed as the Fed and FOMC proffered a cautiously optimistic commentary and failed to expand on its expectations of two additional rate hikes. Sterling rallied through 1.23 to touch intraday highs at 1.2307 as focus shifts to the Bank of England' monthly monetary policy meeting for direction through the medium term.
0.6950 – 0.7100
The New Zealand Dollar rallied throughout trade on Wednesday bouncing back through 0.70 U.S cents. Having maintained a tight trading bank through much of the local session the Kiwi jumped sharply in the wake to the Federal Reserve rate announcement and policy statement. As anticipated the FOMC raised rates 25 basis points drawing attentions to the accompanying policy statement for wider direction. The Fed commentary forced the Kiwi higher as investor' unwound expectations of an additional three, possibly four rate hikes as the Fed proffered a cautiously optimistic outlook and promised to maintain its gradual policy adjustment strategy. Touching intraday highs at 0.7048 the Kiwi opens this morning near 2 weeks highs at 0.7040.
1.6050 – 1.6250
The Great British Pound received no favours overnight from UK' Annual budget report as the downward spiral continued for a third consecutive day and saw seven week lows. The cable cross flatlined during the Asian session keeping its head above 1.2210 before the selloff continued during the European session overnight, reaching an intraday low of 1.2140. Chancellor Philip Hammond released his first Budget providing improved growth forecasts of 2% for the year, believing it will put the UK in a strong position ahead of their exit from the European Union. Despite the short term outlook Chancellor Hammond expects the growth rate to be revised downwards in 2018 and beyond. That along with a stronger Non-farm employment reading in the United States continued to put a dampener on the Pound. Sterling is currently trading at 1.2170 on open against the US Dollar.
0.6850 – 0.6980
The New Zealand Dollar has slipped to a two-month low overnight of 0.6904 on the back of a rising US Dollar index. Intraday economic data released didn’t really move the NZD/USD pair, a report showed that Manufacturing volumes fell 1.8% in the December quarter which was led by lower by falls in meat and dairy. Over in the US, economists had predicted that US companies would add 183,000 jobs to the private sector however the ADP reading came in at a staggering 298,000 well above expectations, construction and manufacturing were the leading sectors. The number firms expectations of a US Federal Reserve rate hike next week. Further downside risk is on the cards with 0.6860 seen as the next support level.
0.7450 - 0.7650
The Australian dollar paused for a break yesterday having rallied the day prior following an increase in commodity prices. The local unit traded yesterday between 0.7579 and 0.7540 having fallen at the beginning of the day after the NAB's business conditions index fell in February to 7 from 10 in the previous month. Another quiet session locally is expected ahead today with the only release Westpac-MI consumer sentiment index for March due out at 10.30am AEDT. All eyes will be on the Federal Reserve interest rate decision with markets all but certain pricing in a 0.25% rate rise. The AUD/USD pair is currently trading at 0.7559, down 0.19% for the session.
1.6000 - 1.6200
The Pound relinquished all gains made on Monday against the Greenback and pulled back under the 1.22 handle to touch an eventual low of 1.2109. The main catalyst for the move came after the UK Parliament approved the Brexit bill which paves the way for the government to trigger Article 50 so that the UK can leave the EU. The process is expected to take two years from the moment the Prime Minister invokes Article 50. Further to this, keeping the Pound at bay is political uncertainty as Scotland push for a new independence referendum. As we look ahead into the remainder of the week, the main market moving events include the FOMC decision tonight and UK' employments details which are followed by the Bank of England' interest rate decision. No surprises are expected however the Governor Mark Carney appears reluctant to make any hawkish statements.
The U.S. Dollar index traded higher overnight and is up 0.4% for the day driven by stronger than expected Producer Price Index. A gain of 0.3% for the month of February and annual gains of 2.2% was the highest since March 2012. EUR/USD declined once again in the European session as it continues to drift lower and tests 1.0600. European Industrial production figures were lower than expected rising 0.9% for the month vs 1.2% expected. In a Reuters poll, results suggest there will be no interest rate rises this year before any changes to its asset purchase program. Macro events dominate headlines this week as market chatter turns to the Federal Reserve decision overnight whereby investors will be keen to see any changes to the “dot plot” guidance into 2018 and 2019. An interest rate hike is now firmly priced into the market.
0.6880 - 0.6950
The New Zealand Dollar opened yesterday at levels around 0.6920 and moved within a very tight range intraday before closing the session at similar levels. 70 cents has once again become a resistance level and having moved over 4% lower in 2 weeks seems attractive to sellers. Overnight as Producer Prices figures increased in the USA it had very little impact on the NZD/USD as investors eagerly await the Fed' decision tonight. With the Fed' communication having turned hawkish over recent time markets are now pricing in further hikes this year. Locally, today sees Statistics New Zealand release quarter-four Current Account figures which measures the value between imported and exported goods, the number is expected to decrease to by 0.30% per cent of GDP to 2.6%. NZD/USD currently changing hands at 0.6917 at the time of writing.
0.7520 – 0.7600
The Australian dollar advanced against its US counterpart on Monday as Iron ore spot markets sprung back to life. The Iron ore spot price rose by 1.78% to $88.26 a tonne. The AUD/USD pair reached an overnight high of 0.7592. A quiet session expected locally today with the only release being the NAB Business Confidence due out this morning at 11.30 AEDT. However, all eyes this week will be on Thursdays Unemployment Rate Decision which is expected to remain steady at 5.7%. The AUD/USD pair is currently trading at 0.7572. We now expect support to hold on moves approaching 0.7540 while any upward push will likely meet resistance around 0.7620.
1.6050 – 1.6200
The Great British Pound edged higher through trade on Monday bouncing off recent lows and last week' losses to move back through 1.22. Having suffered heavy selling through the last two weeks Sterling shrugged off desultory undertones and found support in general USD weakness and calls for a 2nd Scottish independence referendum. Uncertainty surrounding the UK' exit from the European Union has hampered the Pound' performance however suggestions any vote for independence will not take place until the end of 2018 eased concerns surrounding heightened political risk. Attentions now turn to unemployment numbers Wednesday ahead of the FOMC rate announcement and Bank of England monetary policy statement as key markers in a stacked economic docket.
As the Federal Reserve meeting looms, yields hit its highest levels this year as the CME fed watch tool price in a 95% chance of a rate hike this week. Markets were calm as the US Dollar index traded slightly higher, with investors now set to focus its attention on the Fed dot plot, where it is predicted a possible shift higher to include four hikes in 2018 and 2019. EUR/USD climbed to a four-week high testing 1.0710, noting a change in Mario Draghi' rhetoric to monetary policy introductory statement. The Euro was then sold off this morning to 1.0650 on comments by the head of Belgian Central Bank Jan Smets to the wall street journal that the removal of such rhetoric does not suggest a change in monetary policy stance by the ECB. There was little change to USD/JPY positions as it traded to a high of 114.90 overnight with Bank of Japan expected to make no changes to interest rates and its quantitative easing program.
0.6850 – 0.7000
The New Zealand Dollar is weaker today when valued against its US counterpart falling to a 24-hour low of 0.6913 as the Federal Reserve Interest rate decision remains centre stage which is expected to result in the first of a series of rate hikes this year. On the local data front, yesterday Food prices increased 2.2 percent in the year to February 2017, led by higher prices for fruit and vegetables, and dairy products. This was the largest annual increase since December 2011. A quiet session expected locally today with little to no economic data due. The NZD/USD pair is currently trading at 0.6923.
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