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BY OFX

Improved retails sales bolster U.S rate hike expectations


Australian Dollar

AUD / USD

Expected Range

0.7530 - 0.7630

The Australian dollar has remained relatively unchanged from yesterday' market open as the Reserve Bank of Australia released its Monetary Policy meeting minutes for November. As expected the RBA is shifting to a more neutral guidance as they become more optimistic on the domestic economy. Previous interest rate cuts this year have assisted inflation in returning to targeted levels. On release of the minutes the Australian dollar rallied to an intraday high of 0.7580. Retail sales and the Empire State manufacturing index both strengthened in the United States for the month of October providing the catalyst for the dollar to rally and the AUD/USD cross to reach a low of 0.7510 overnight. A bout of profit taking on USD longs has seen the Aussie bounce back to open this morning at 0.7560.

Great British Pound

GBP / AUD

Expected Range

1.6400 - 1.6600

A wild night on the Sterling cross as attentions turned back to Brexit discussions. A leaked memo to the times and seen by BBC has warned that the government has no actual exit strategy of leaving the European Union and up to 30,000 civil servants will be required to fulfil Brexit-related projects. The British Pound was also sold off in droves from intraday highs of 1.25 to a low of 1.2380 as CPI figures were released to the market where an annualised reading of 0.9% was down from September' reading of 1%. The Great British Pound has recovered slightly to open this morning at 1.2450 against the US dollar and is also trading at 1.6460 against the Australian Dollar and 1.7530 against the Kiwi.

Majors

USD, EUR, JPY

Expected Range

N/A

A stronger than expected improvement in retail sales across the world' largest economy throughout October helped push the recent U.S Dollar rally toward 11 month highs through trade on Tuesday. Profit taking and an aggressive sell off of bonds had ensured the recent demand for treasury yields slowed halting the Greenbacks upward charge. The uptick in consumer spending however bolstered yields and reinforced expectations the Fed will raise rates next month. The dollar moved through 5 month highs against the Japanese Yen touching intraday highs at 109.34 while the Euro fell through 1.0750 for the first time since January. As demand for yields remains in intact and investors continue to price in changing Monetary Policy expectations there is scope for further USD gains through the short and medium term. It is however important to note that increases in implied volatility across key currency pares (USD/JPY and EUR/USD) suggest uncertainty remains heavy in the minds of investors. Traders and markets are still unsure of whether President Elect Donald Trump can deliver the aggressive fiscal stimulus promised throughout his campaign and analysts are wary of a sudden USD reversal should sentiment shift or the USD enter overbought territories. Attentions today turn to Producer Price indexes as a marker of consumer inflation and possible catalyst driving tighter monetary policy.

New Zealand Dollar

NZD / USD

Expected Range

0.7050 - 0.71500

The New Zealand dollar edged lower throughout trade on Tuesday nearing one month lows and touching 0.7071 overnight. Despite improved dairy prices the Kiwi fell as stronger than expected U.S retail sales bolstered demand for the world' base currency. Increasing expectations the Fed will raise interest rates in December amid a rapid surge in demand for U.S Treasuries has forced a remarkable NZD sell off. Having lost over two and a half cents in the week since the U.S Presidential election the Kiwi sits poised on a point of key technical support. A move below 0.7055 could trigger further selling pressures and a deeper downward correction through 0.70. Attentions today turn offshore for direction ahead of key domestic retails sales numbers Thursday.

BY OFX

Greenback extends its rally


Australian Dollar

AUD / USD

Expected Range

0.7480 – 0.7600

The Australian dollar traded in a narrow range yesterday absent of any major domestic data. Opening the session at 0.7540, a lower reading on Chinese retail sales and industrial production figures failed to cause any major concerns as the Aussie bounced off intraday support at 0.7520. We will continue to see downward pressure on high beta currencies as the market sees a shift higher in US bond yields and rising US inflation expectations. The Reserve Bank of Australia releases their minutes from the monetary policy meeting on Melbourne Cup Day where interest rates were left on hold at 1.5%. The Australian dollar opens this morning unchanged at 0.7550.

Great British Pound

GBP / AUD

Expected Range

1.6480 – 1.6620

After recording its best fortnight in 8 years against the US Dollar, The British Pound peaked at 1.2580 on open yesterday morning before fading away to an overnight low of 1.2450 bucking the short term uptrend heading into this evenings all important UK Inflation figures. Forecasts are expected to show a two year high of 1.2% for the year which would be the highest reading since October 2014. Experts are predicting inflation to be above the Bank of England' 2% target by end of next year due to the general fall in Pound and commodity prices. Potential movements on Cable will also be seen with US retail sales this evening. The British Pound is currently testing 1.25 on open against the Greenback, and is lower against the Australian dollar (1.6550) and Kiwi (1.7590).

Majors

USD, EUR, JPY

Expected Range

N/A

It has been all one way traffic during the early parts of this week with investors flocking towards the world' reserve currency. Whilst US markets enjoyed a long weekend in acknowledgement of Veterans Day, routs in global bonds and emerging markets intensified on Monday as investors looked to pre-empt a of wave fiscal stimulus from the newly elected President Donald Trump. Rising to its highest level in nine months the US dollar maintained its upward momentum versus most its major counterparts, a move made even more straightforward in anticipation of the US Federal Reserve' second rate increase of the year, expected to be delivered in December. In a session void of any data releases, the tide has well and truly turned in favour of the Greenback as budgetary assistance remains poised to cool the endlessly vast world of record low interest rates. Opening stronger versus the Euro at a rate of 1.0741 the Greenback is stronger also versus the Japanese Yen (108.374).

New Zealand Dollar

NZD / USD

Expected Range

0.7060 – 0.7150

The New Zealand dollar has done well to hold its ground in the early parts of this week in light of a US Dollar which has taken flight in the wake of Donald Trump' victory. Whilst well off the highs witnessed last week, support at 0.7070 kicked in on Monday as investors continued to pull funds from gold and emerging markets, favouring instead US Dollar dominated assets. Opening in a marginally weaker position this morning at a rate of 0.7102, tomorrow' diary trade auction along with a retail sales number remains the domestic highlight.

BY OFX

USD rally continues in wake of Trump victory


Australian Dollar

AUD / USD

Expected Range

0.7480 - 0.7630

The Australian dollar continued to see large swings of volatility as the US dollar strengthened against the majority of its counterparts Friday evening. Peaking at 0.7630 at the end of the domestic session, the Aussie continued its downward path through weekly support levels to close at 0.7540. The market continues to digest what the new incoming Presidents potential pro-growth, and fiscal policies will mean for the global economy. In the short term the Australian dollar is taking the brunt of movements as a surge into US Yields continues to gain momentum. On the domestic front this week the RBA releases its monetary policy minutes on Tuesday and Employment figures on Thursday. The Reserve Bank of Australia kept its cash rate on hold at 1.5% on its annual Melbourne Cup Day meeting and we could see further rhetoric tomorrow of changes to a neutral stance in rate guidance going forward as growth and inflation remain largely unchanged. The Australian dollar opens this morning steady at 0.7540 against the US Dollar.

Great British Pound

GBP / AUD

Expected Range

1.6550 - 1.6750

The Great British Pound recorded its best fortnight in 8 years against the USD with investors' having turned their attention away from Brexit and focus shift towards the US presidential election. Since Donald Trump' victory the pound has been the best performer of any major currency. However, the pound' bullish run against the US dollar faded towards the end of Friday' European session. The pound still finished the week over half a cent higher rallying above 1.26 on Friday for the first time since October 6, despite the US Dollar' own strength. The main release for the Pound in the coming week is inflation data for the month of October, which is forecast to rise 1.1% (from 1.0% previously). On Wednesday, we have the release of the labour data which is expected to remain at 4.9 percent. The week rounds off with Retail Sales on Thursday. The Pound opens this morning steady at 1.2595 against the USD.

Majors

USD, EUR, JPY

Expected Range

N/A

The USD dollar continued its upward march throughout trade on Friday as investors jumped behind the world' base currency on expectations Donald Trump' win could fuel fiscally driven inflation and support Federal Reserve rate hikes. The dollar touched its highest level in 9 months when measured against a basket of currencies and enjoyed its best weekly advance in over a year nudging 107 JPY while the Euro fell through 1.0850 to intraday lows at 1.0831. Having absorbed the initial shock markets have turned to review Trump' policies and his promises for infrastructure and domestic growth. The Republican President Elect has promised to spend big, improving infrastructure across the country while generating a broader base of new jobs. Such policies are seen as driving growth and inflation allowing some analysts to amend their timeline of Fed monetary policy changes. Increasing expectations, the Fed will raise rates in December along with a shorter path to future rate hikes has fuelled demand for the USD and highlights the gap between major Central Bank policy platforms. Direction today will again be driven by demand for U.S treasury yields while ECB President Mario Draghi address to Italian treasury will be closely scrutinised for any sign as to how the bank will act in response to last week' shock.

New Zealand Dollar

NZD / USD

Expected Range

0.7040 - 0.7180

The New Zealand Dollar remained on the back foot for the latter part of last week after the Central Bank cut interest rates on Wednesday and the door remains open for further cuts. The NZD/USD continued to move lower on Friday from levels around 0.7200 after the US Consumer Sentiments figures increased to a 5-month high in November as investors remain optimistic around the US presidential elections last week and expectations that Trump policies will boost spending and inflation. The pair closed the New York Session around US 71c, down nearly 4% in the week, further downside risks are on the cards with Retail Sales expected to pull back from the previous quarter.

BY OFX

Demand for Yields and Bonds drive USD rally


Australian Dollar

AUD / USD

Expected Range

0.7530 - 0.7730

The Australian Dollar edged lower through trade on Friday as investors demand for USD denominated assets increased. Having edged higher and recouped losses throughout the domestic session the AUD fell sharply overnight moving back through 0.76 to touch intraday lows at 0.7573. Markets demand for US treasuries is driving direction and while the AUD has found support in renewed risk appetite and a move away from haven assets in the aftermath of the election Greenback gains are putting downward pressure on the commodity linked currency. A series of lower highs and lower lows suggest the AUD could be open to a larger downward correction and should the Aussie break key technical resistance levels at 0.7580 a move toward 0.75 is open. Attentions and direction today will again be driven by demand for treasuries and bonds.

Great British Pound

GBP / AUD

Expected Range

1.6400 - 1.6580

The relief rally has well and truly remained in play over the past 24 hours with the Great British Pound comfortably breaking the 1.2500 mark when valued against its US Counterpart. Outperforming versus the majority of its counterparts the Sterling' push higher overnight was so strong previous resistance levels at 1.2360 are now being earmarked as fresh levels support. During a window absolutely dominated by the sentiment under-currents triggered by Donald' Trump victory on Wednesday perceptions have significantly changed during the trading sessions since with many experts voicing renewed faith that Trump could deliver some major sources of stimulus for the world' largest economy. Opening notably stronger versus the Greenback at a rate of 1.2558 the Sterling is also significantly stronger versus both the Australian dollar (1.6507) and the New Zealand dollar (1.7437).

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S dollar railed through trade on Thursday moving through three month highs against the Yen as markets adjust to what a Trump Presidency may mean for domestic growth and inflation. The Greenback moved through 106 to touch intraday highs at 106.94 before resistance and profit taking took hold, while the Euro fell through 1.09 to touch 1.0867. Trump' protectionist trade policies and infrastructure plans are expected to boost spending and fuel inflation bolstering demand for Treasury yields and consequently demand for the world' base currency. Yields on long dated bonds rose to their highest level in 10 months as traders and markets chase long term returns. With little headline data on hand direction will stem from yield plays and demand for treasury bonds. While the current demand for dollar denominated assets continues we expect the USD to test new highs against the Yen, while the Euro remains under further downward pressure.

New Zealand Dollar

NZD / USD

Expected Range

0.7150 - 0.7250

Re-affirming the markets commonly held view, the RBNZ cut its official bank cash rate by 25 basis points yesterday to 1.75 percent. In a move which was broadly anticipated the consensus view now is that the most recent expansionary move represents the end of their current easing cycle. Trading between a low of 0.7176 and a high of 0.7307 over the past 24 hours, overall the Kiwi has remained under pressure when valued against its US Counterpart a plight not assisted given the US dollar has found some firmer footing. Opening notably weaker at a rate of 0.7194 versus the Greenback, investors in the near-term are likely to be keeping a close on Trump' transition as he looks to change his focus from campaigning to governing.

BY OFX

Trump shock fails to incite market meltdown


Australian Dollar

AUD / USD

Expected Range

0.7580 – 0.7730

The Australian dollar tumbled through trade on Wednesday as markets responded to the shock election of Republican candidate Donald Trump. The mainstream media and wider financial markets had largely priced in a win for Democrat Hilary Clinton and as early polling suggested she may be the first woman to ascend the white house steps the AUD rallied to touch 0.7771. However, as key battleground states fell to Trump and Hilary lost what were previously consider safe democratic electorate markets dumped the Aussie in a flight to safety. The AUD lost almost 2 cents to touch intraday lows at 0.7585 before European and North American markets entered the fray and largely stabilised. Recovering from the shock that plagues Asian markets the Aussie recouped losses overnight moving back through 0.76 and opens this morning buying 0.7662 U.S cents. Attentions now shift to deciphering what exactly a Trump presidency will look like. His largely conciliatory victory speech went a long way to placating markets and seems to have had little impact on expectations for Fed policy into the end of the year. While the AUD remains range bound failing to break outside 4 month trading bands a strengthening USD could be the catalyst that pushes the AUD below recent supports at 0.7580 and 0.75.

Great British Pound

GBP / AUD

Expected Range

1.6080 – 1.6320

The Great British Pound opens this morning marginally higher having found early support as markets responded to the shock realisation republican Donald Trump will be the 45<sup>th</sup> President of the United States. Rallying through 1.25 to touch session highs at 1.2548 Sterling relinquished gains as European and North American markets failed to continue the panicked selling that plagues Asian markets and equities. Edging back lower cable then bounced about between 1.2375 and 1.2475 as analysts and investors absorb just what this means for global markets. Will Trump enact the protectionist trade policies that will largely damage and slowdown growth across the global economy and what does this mean for the Bank of England and domestic UK growth? With demand for U.S treasury yields driving markets direction today and little macroeconomic data on hand we will be watching for further USD gains as the immediate aftermath appears dollar positive.

Majors

USD, EUR, JPY

Expected Range

N/A

The U.S dollar closed higher Wednesday recouping early losses suffered throughout Asian trade. Buoyed by demand for U.S Treasury yields the Greenback touched fresh highs against the Yen recovering from intraday lows at 101.17 to touch session highs at 105.90. Trump' shock Presidential victory forced yields on Treasury notes and bonds to their highest levels in nine months as markets jumped behind expectations the President Elect will introduce trade barriers designed to promote domestic wages and boost inflation. With yields driving direction, support for the Dollar rose across the board forcing the Euro back through 1.10 to intraday lows at 1.0920 while support for a December Fed rate hike remains strong. CME' Fed Watch Tool and Fed Funds Futures show a strong expectation the Fed will raise rates before the year is out and as direction is governed by yield demands short term USD gains are a strong possibility as the market absorbs just what this election result means for U.S economy and wider global economy. Can Trump follow through and unite a divided America promoting domestic growth and riding this powerful shift away from globalisation.

New Zealand Dollar

NZD / USD

Expected Range

0.7260 – 0.7390

The New Zealand dollar moved lower through trade on Wednesday as markets responded to the shock election win for Republican candidate Donald Trump. Crashing through 0.73 throughout domestic and Asian trade the Kiwi was battered as markets fled to the safety of haven assets. Touching intraday lows at 0.7262 the Kiwi found support above the key technical averages and held onto throughout overnight trade as investors and markets absorbed exactly what a Trump led America could mean for the Global economy. US treasury yields surged and investors jumped behind the Greenback forcing a selloff in haven plays and adding some respite to the Kiwi collapse. Having opened buying 0.7294 U.S cents the NZD has rallied in response to the RBNZ decision to cut the bench mark cash rate from 2.00% to 1.75%. The move was largely anticipated and signs the RBNZ is in no hurry to ease rates further has forced the NZD back through 0.73 to 0.7340 at time of writing.

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