Upbeat U.S macroeconomic data revives calls for rate hike

Australian Dollar

Expected Range 0.7060 – 0.7230

The Australian dollar dropped sharply throughout the U.S trading session Friday following a string of optimistic data prints. Plunging over 100 points the Aussie followed a raft of currencies lower after the U.S recorded stronger than expected readings across fourth quarter growth, consumer sentiment and the Fed’s preferred measure of inflation, the core PCE price index. The upbeat data sets revived calls an FOMC rate hike is still possible, highlighting the gap between US monetary policy and that of its counterparts across wider Europe and Asia. The AUD closed Friday buying 0.7121 U.S cents with directional impetus through Monday stemming from the weekends G20 summit and fallout. Finance Ministers inability to set in motion concrete plans to drive growth will likely force investors to shy away from risk assets and equities leaving the AUD open to further downside risk. Attentions this week turn to tomorrow’s RBA rate statement and policy announcement.

New Zealand Dollar

Expected Range 0.6550 – 0.6780

The New Zealand dollar followed its antipodean counterpart lower through trade on Friday, driven downward by a raft of upbeat US data sets. The Kiwi plummeted 150 points into the close crashing through 0.6650 to touch intraday lows at 0.6617 after stronger than anticipated U.S fourth quarter growth, consumer sentiment and core PCE price index prints revived calls for a second U.S monetary policy tightening. Direction this morning stems from investor reactions to the weekends G20 summit of Finance ministers. The economic leader’s failure to deliver new and tangible plans for growth could spark a risk off run in early trade leaving kiwi open to further downside correction.

Great British Pound

Expected Range 1.9250 – 1.9650

The Great British Pound touched fresh seven year lows on Friday as fears of a Brexit dominate market demand while a string of upbeat U.S data sets highlighted the widening gap between FOMC and BoE monetary policy. Cable touched lows at 1.3853 marking its largest weekly loss since 2009. With little domestic data on hand to revive bullish bets the bearish price action will likely continue in throughout the week ahead with Sterling set to test new lows.

Majors

Expected Range N/A

The U.S Dollar advanced across the board on Friday, posting its strongest weekly performance in 4 months following a string of upbeat data sets. Preliminary fourth quarter GDP, Consumer sentiment and the core PCE price index all surpassed market expectations reviving calls for a second Federal Reserve interest rate increase. Friday’s data surprised investors as analysts anticipated a softer print in support of loose Fed monetary policy. Instead the optimistic review renewed hopes a consumer driven rebound is still kicking. The Greenback touched 1 week highs against the Japanese Yen while the Euro plunged through 1.10 touching intraday lows at 1.0912 moving into the weekly close. With scepticism toward a Fed rate hike thawing the Greenback could find further support when contrast with European and Japanese central bank monetary policy platforms. Direction this morning will stem from the G20 summit and investor’s reaction to what can only be described as a failure by finance minister to push the button on new growth measures. With no strategy for coordinated stimulus to spark demand and economic activity analysts are greeted by much the same plan for growth forcing equities and commodity prices lower. Attentions this week turn to Friday’s Non-farm payroll print with particular importance directed toward wage growth as a critical marker in influencing the Fed and future monetary policy guidelines.