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BY MATT RICHARDSON

FOMC Hangover weighs heavy on USD


Australian Dollar

AUD / USD

Expected Range

0.7650 – 0.7780

The Australian dollar gapped higher through trade on Monday buoyed by wider USD softness following last week' dovish FOMC monetary policy outlook. Punching through 0.77 the AUD moved through resistance at 0.7690 touching intraday highs at 0.7746. The Aussie then edged lower pulling back toward key technical resistance at 0.7730 and opens this morning at 0.7729. The hangover from last week' dour outlook and propose slower rate of adjustment along the road to monetary policy normalisation forced the greenback lower as investors scrambled to correct positions and sell down USD longs. Safe Haven, emerging market and commodity currencies continued to benefit through trade on Monday as attentions turn to Today' RBA minutes for renewed guidance into diverging central bank policy outlooks.

Great British Pound

GBP / AUD

Expected Range

1.5930 – 1.6100

It was a quiet night for traders as the Great British Pound drifted lower from an intraday high against the Greenback of 1.2430. The Pound started its descend as more certainty overnight regarding Article 50 has come to the forefront of investors’ minds as Theresa May communicated to the European council that she will trigger Article 50 on March 29th. UK eagerly awaits this evenings inflation figures as previous noted by the British Chambers of commerce that inflation is predicted to reach 2.7% in 2018. Cable opens this morning at 1.2360.

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S Dollar struggled to extend breaks above six week lows as the spectre of the Federal Reserve' dovish undertone hangs heavy over the world' base currency. The dollar retreated last week in the wake of the Fed' interest rate hike as investors scrambled to adjust interest rate bets as the FOMC hinted a slower pace of monetary policy normalisation was appropriate and the inheritance of the incumbent sell off continued through trade on Monday. While comments from FOMC member Charles Evans, where in, the Chicago Fed President suggested the board was on track to raise rates twice through the year steadied the ship market participants appeared reluctant in reversing losses ahead a raft of key Fed Policy makers commentary. Attentions now turn to Fed president Janet Yellen on for a deeper insight into short term direction.

New Zealand Dollar

NZD / USD

Expected Range

0.6975 – 0.7125

The New Zealand dollar traded in a tight range in local markets yesterday moving off support at 0.7010. Westpac consumer sentiment did little to move the Kiwi on open yesterday, while the NZ performance of services fell slightly but remains above its long term average. The Kiwi reached a high of 0.7070 as investors wait for the latest round of Global Dairy trade auction readings on Wednesday. The New Zealand Dollar opens steady at 0.7050.

BY MATT RICHARDSON

Ranges steady after mid-week rally


Australian Dollar

AUD / USD

Expected Range

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

Expected Range

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.

Majors

USD, EUR, JPY

Expected Range

N/A

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

Expected Range

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%

BY JOEL HOLMES

US Dollar takes focus ahead of G20 meeting


Australian Dollar

AUD / USD

Expected Range

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.

Great British Pound

GBP / AUD

Expected Range

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.

Majors

USD, EUR, JPY

Expected Range

N/A

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.

New Zealand Dollar

NZD / USD

Expected Range

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.

BY JOEL HOLMES

US Dollar sold off on more gradual pace of monetary tightening


Australian Dollar

AUD / USD

Expected Range

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.

Great British Pound

GBP / AUD

Expected Range

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.

Majors

USD, EUR, JPY

Expected Range

N/A

New Zealand Dollar

NZD / USD

Expected Range

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.

BY JOEL HOLMES

US Dollar sold off on more gradual pace of monetary tightening


Australian Dollar

AUD / USD

Expected Range

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.

Great British Pound

GBP / AUD

Expected Range

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.

Majors

USD, EUR, JPY

Expected Range

N/A

New Zealand Dollar

NZD / USD

Expected Range

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.

BY JOEL HOLMES

Market turns its attention to US Federal Reserve Decision


Australian Dollar

AUD / USD

Expected Range

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.

Great British Pound

GBP / AUD

Expected Range

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.

Majors

USD, EUR, JPY

Expected Range

N/A

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.

New Zealand Dollar

NZD / USD

Expected Range

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.

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