Australian Dollar:
The Australian dollar rallied to fresh weekly highs through Wednesday after a soft U.S inflation report tempered expectations the Fed will raise rates at its much anticipated FOMC press conference tomorrow. Having offered little through domestic trade the AUD rallied through 0.7150 before meeting resistance on approaches to 0.7200 after a Bureau of Labour Statistics report showed U.S CPI contracted through August. The poor read highlights just how far away from its inflation targets the Fed is and dampens hopes the FOMC will raise rates before years end. Volumes remain thin with all eyes turning to the world’s largest central bank. Should the Fed choose to maintain the current policy path and offer anything less than a Hawkish outlook we could expect another run on USD longs as investors extended the timeline of monetary policy adjustment into 2016.
We expect a range today of 0.6920 – 0.7350
New Zealand Dollar:
The New Zealand Dollar enjoyed a mixed session through Wednesday struggling to break outside ranges between 0.6330 and 0.6380. The NZD found support in softer than expected US inflationary data however investors appeared reluctant to ride the move higher selling into rallies ahead of two significant data events today; that is quarterly GDP growth and the Federal Reserve’s Policy announcement. Should GDP growth fall short of expectations the Kiwi will come under increasing pressure as the likelihood of additional monetary policy easing intensifies.
We expect a range today of 0.6180 – 0.6500
Great British Pound:
The Great British Pound recouped early week losses surging upward through trade on Wednesday. Cable rallied strongly after the unemployment rate unexpectedly fell to 5.5% while average hourly earnings jumped 2.9% comfortably surpassing market expectations. The strong labour market data supports calls for consumer driven growth and as wage conditions improve there is an expectation price pressures will begin to build. Moving through 1.54 and 1.5450 Sterling found additional support in a soft U.S inflation print and broke through 1.55 for the first time since late August. Attentions now turn to the week’s primary directional event, the FOMC press conference, for guidance into the weekend and beyond.
We expect a range today of 2.1378 – 2.1875
Majors:
The U.S Dollar eased through trade on Wednesday relinquishing ground across most major G-10 counterparts after inflationary pressures through August unexpectedly contracted pacifying calls for an immediate change in Fed policy. The Bureau of Labor Statistics monthly CPI report showed a 0.1% decline, paving the way for a downward revision in the Fed’s preferred measure of inflation the PCE index and highlighting just how far short the Fed is in attaining its inflation targets. The soft print raises concerns as to the timing of a possible policy shift and futures markets downgraded expectations for change at tomorrow’s press conference. The Euro edged slightly higher weighed down by its own poor inflationary print and a widening in US and German Treasury bond yields. Holding above 1.1250 the 19 nation combined unit touched intraday highs of 1.1320 before falling back below 1.13 as investors and markets square positions in preparation for the Fed Decision. With little macroeconomic data available across international economic calendars all eyes turn to the US and the FOMC as traders seek certainty and forward monetary policy guidance.
Data releases:
AUD: RBA Bulletin
NZD: GDP q/q and BoE Quarterly Bulletin
JPY: Trade Balance and BoJ Governor Kuroda Speaks
GBP: Retail Sales m/m
EUR: ECB Economic Bulletin and Italian Trade Balance
USD: Unemployment Claims, Current Account Balance, Housing Starts, Philly Fed Manufacturing Index, FOMC Economic Projections, FOMC Statement, Federal Funds Rate and FOMC Press Conference.