Australian Dollar:

In a move that surprised many investors and analysts the RBA opted to maintain its benchmark cash rate at 2.25% yesterday. Speculators had priced in a rate cut in the wake of last week’s dismal Capex report and an evident shift to an easing bias. With traders left scrambling to cover their short positions the move prompted an immediate response as markets forced the AUD back through 0.78 US cents touching intraday highs of 0.7844. The upward rally again met resistance on approaches to 0.7850 as the RBA rate statement was absorbed. Governor Stevens suggested that while it was prudent to leave rates unchanged the policy committee will assess conditions on a meeting to meeting basis where further easing may be appropriate. Despite concerns surrounding a housing bubble (particularly in Sydney) below trend growth, rising unemployment and softening labour market conditions certainly leave room and scope for an April or May rate adjustment especially whilst the AUD remains stubbornly above estimates of its fundamental value. Attentions today turn to a 4th Quarter GDP report, with expectations for a soft read and slowdown in annualised growth to 2.5% priced in.   

We expect a range today of 0.7620 – 0.7920

 

New Zealand Dollar:

The New Zealand dollar was dragged higher through trade on Tuesday as the AUD and Australian Reserve Bank lead a rally across commodity driven currencies. With the domestic docket void of headline data the Kiwi advanced 0.9% touching intraday highs of 0.7574 with a rise in Dairy prices overnight cementing gains above 0.7530. The local economic calendar is again void of any frontline macroeconomic indicators and investors will be forced to look off shore with Chinese Services PMI and prelim US non-farm payrolls driving direction.

We expect a range today of 0.7450 – 0.7650

 

Great British Pound:

The Great British Pound offered little to excite investors through trade on Tuesday bouncing about within a 50 point range between 1.5345 and 1.5395. Despite a strong improvement in Construction PMI output investor focus remains squarely on Central Bank monetary policy and with Mark Carney proffering much the same rhetoric in his address to the Treasury Select Committee Sterling struggled to mount any meaningful move. Markets look to the BoE for direction as its Monetary Policy Committee convenes Thursday with expectations the neutral policy stance will be maintained.

We expect a range today of 1.9420 – 1.9820 


Majors:

The U.S Dollar edged lower through trade on Tuesday as markets adjust positions in the lead up to the ECB’s policy meeting and announcement wherein details of its newly appointed bond buying program will be revealed. The Dollar index shifted away from decade highs in a jerky trading session; it seems investors are looking for the next directional cue and the breakup of the ECB’s 1.1 trillion Euro stimulus package is in the forefront of markets focus. Commodity propelled currencies stole much of the attention throughout trade on Tuesday with the AUD and CAD leading the charge. The RBA’s decision to maintain its benchmark cash rate and a better than expected annualised GDP report out of Canada saw markets scrambling to cover short positions prompting general Greenback weakness. The USD opens this morning lower against both its European and Japanese counterparts with suggestions the USD/JPY may have reached the upper limit within the current trading ranges.

Attentions now turn to prelim a Non-Farm Payroll report and the Fed Chair Janet Yellen as she addresses the Citizens budget commission as the key markers governing direction Wednesday.  

 

Data releases

AUD: GDP q/q 

NZD: No Data

JPY: No Data

GBP: Services PMI

EUR: Spanish, Italian and Eurozone Services PMI and Eurozone Retail Sales m/m

USD: Fed Chair Janet Yellen Speaks, FOMC Member Evans Speaks, ISM Non-Manufacturing PMI, Crude Oil Inventories and ADP Non-Farm Employment Change