Australian Dollar
Expected Range 0.7300 – 0.7500
The Australian Dollar rallied through trade on Wednesday enjoying a second consecutive day of renewed risk appetite. Bursting back through 0.74 the AUD held onto gains as markets backed commodity linked and emerging market currencies as the initial panic that followed Britain’s European exodus eased. Touching intraday highs at 0.7458 the Aussie has recovered much of the losses suffered in the immediate post Brexit sell off yet investors seem reluctant to push the unit back through the 0.75 handle with resistance forming on moves beyond 0.745. With little on today’s economic docket to drive direction investors will look to risk flows for guidance through trade on Thursday. Despite the respite over the past 48 hours there is a sense that the Brexit impact is far from over. Markets and investors simply appear to be repositioning themselves, steadying positions and preparing for next stage in the Brexit process. The uncertainty of what lies ahead and where this new path leads is forcing investors to the sidelines.
New Zealand Dollar
Expected Range 0.6980 – 0.7300
The New Zealand dollar followed is antipodean counterpart higher through trade on Wednesday buoyed by improving demand for risk as Brexit fears begin to abate. Running back through 0.71 the Kiwi touched intraday highs at 0.7136 as investors looked to riskier assets. Markets appeared to chase the NZD and a higher yield return as expectations for a prolonged period of accommodative monetary policy increase. There is an expectation central banks will be forced to step in and defend growth and inflation throughout the period of uncertainty ahead improving demand for the higher yielding NZD. With little of note to drive domestic direction today attentions again turn to global risk flows for guidance.
Great British Pound
Expected Range 1.7850 – 1.8250
The Great British Pound rallied for a second consecutive day through trade on Wednesday marking a 4 cent recovery from 31 year lows touched on Monday. Investors look to take advantage of easing Brexit tensions and renewed risk appetite securing profits and repositioning themselves for the next stage of the British European exit. Despite the recent rally there is an overwhelming sense that investors and markets are simply sitting back waiting for a more definitive guide moving forward. With Europe likely to take a hard line in negotiating new trade and immigration agreements it will be unlikely that leave campaigners will be able to secure the agreements promised throughout the referendums campaign. We expect a prolonged period of GBP weakness ahead as the true impact of Brexit is realised.
Majors
Expected Range N/A
The U.S dollar edged lower against both the Euro and Pound while giving up gains earned against commodity linked and emerging market currencies through trade on Wednesday. Falling for the second consecutive day the Greenback suffered at the hands of investors looking to take advantage of renewed demand for risk and abating tensions following the Brexit referendum. The Euro clawed its way back through 1.11 touching intraday highs at 1.1128 while the traditionally safe haven Japanese Yen relinquished recent gains and the worlds base currency edge back toward 103.00. After a historical sell off in the wake of the Brexit decision a sense of calm appears to have descended over the market and while normal trading has seemingly resumed investors are simply waiting for a more definitive path moving forward. There is an expectations the world’s central banks will be forced to step in and defend growth and inflation through extended periods of looser monetary policy and increased stimulus. Expectations surrounding Fed monetary policy action have been pushed out again in the wake of the Brexit decision with just 15% of analysts pricing in an increase before years end and just 17% pricing in any action prior to March 2017. With little of note on the economic calendar through trade on Thursday investors will again be driven by risk flows with attentions shifting to FOMC member Bullard for an insight into the Fed’s Brexit reaction.