Australian Dollar
Expected Range 0.7050 – 0.7180
The Australian dollar rallied into the close on Friday, bouncing higher having found support on moves below 0.7075 closing at 0.7150. The Aussie advanced on burgeoning demand for risk shrugging off Thursday’s disappointing employment data. The Aussie dollars higher yield means the currency remains attractive to investors chasing a higher return and will likely add support to moves toward 0.70 in the short to medium term. With little data available domestically the AUD will take its cues this week from offshore stimuli. FOMC and Federal Reserve monetary policy remains in focus as investors turn to Friday’s preferred measure of inflation the PCE price index. A strong read will support last week’s upbeat CPI print and suggests a meaningful shift in inflationary expectations is perhaps imminent. The strength of any Greenback rally will rely heavily on macroeconomic data over the coming weeks. A series of upbeat data sets could force investors to reassess their interest rate expectations and fuel a longer USD upturn, forcing the Aussie outside recent ranges.
New Zealand Dollar
Expected Range 0.6550 – 0.6690
The New Zealand dollar jumped upward into the close on Friday moving back through 0.66 having capitalised on the markets increasing appetite for risk. A strong U.S CPI inflation report bolstered expectations the Fed will raise rates throughout the year, improving sentiment and pushing investors towards currencies offering a higher yield return. With little headline domestic data available the Kiwi will remain open to wider offshore trends throughout the week ahead. A string of stronger US data may force the Kiwi lower as investors adjust their monetary policy expectations.
Great British Pound
Expected Range 1.9990 – 2.0200
The Great British Pound bounced higher into the close on Friday after European Leaders agreed a deal that will keep the UK in the European bloc, assuaging fears of a Brexit and breakup of the European economic union. Sterling rallied through 1.43 and 1.44 in the immediate aftermath as attentions now turn to Prime Minister David Cameron. The British PM now holds a concrete proposal to take to the public, a proposal he must sell if the UK is to remain a part of the broader European economy. A referendum can be called as early as June ensuring Sterling price swings continue into the middle of the year as markets respond to political queues that may hint to which way the public will vote.
Majors
Expected Range N/A
The U.S Dollar enjoyed a stronger than anticipated Core Consumer Price Index (CPI) print Friday bolstering expectations the Federal Reserve will raise rates throughout 2016. Core CPI increased some 0.3% through January marking a 2.2% increase year on year. The strong read comes on the back of better than expected Retail Sales and an uptick in average hourly earnings prompting speculation that inflation may be starting to move in the right direction. Only 25% of the market had priced in an FOMC rate increase prior to the monthly CPI print. That number jumped to 40% in the aftermath as future traders scrambled to adjust positions ahead of this Friday’s Core PCE Price Index release, the Fed’s preferred measure of inflation. While both CPI and Core PCE are typically closely correlated a strong read on Friday will bolsters claims price pressures are moving in a meaningful direction and prompt a longer Greenback recovery. The USD remain vulnerable to JPY strength as risk sentiment continues to waver while EUR/USD touch Fresh weekly and monthly lows dipping below 1.11 before supports kicked in leading into the close.