Australian Dollar:
The Australian dollar edged higher through trade overnight moving back through 0.71 before meeting resistance on approaches to 0.7150. Despite a stable inflationary print bolstering US interest rate expectations and renewed pressure on commodity prices the AUD failed to succumb to the relentless Greenback advance bouncing off intraday lows at 0.7071. The RBA’s wait and see approach to monetary policy was highlighted in the monthly meeting minutes and assuaged fears of an imminent rate cut. The minutes offered some support but did little to reverse the overriding bearish trend. While it seems markets have all but priced in a December U.S monetary policy adjustment investors seem reluctant to push the Aussie through the psychological 0.70 barrier without a definitive central bank move. Attentions now turn to the FOMC meeting minutes wherein any dovish or divisive undertone could spook analysts and fuel a USD repositioning.
We expect a range today of 0.7020 – 0.7190
New Zealand Dollar:
The New Zealand dollar extended its decline through trade on Tuesday touching intraday lows at 0.6451. Global dairy prices dropped nearly 8% overnight, the third reduction in as many GDT auctions leaving the NZD open to further declines given the apparent bubble in prices seen in August and September has evidently burst. Whole milk powders lead the decline plunging 11% while skim milk powder moved 8.1% lower. Fonterra, the country’s largest exporter, expects more volatility into the end of the year however helped to halt the Kiwi decline suggesting a possible uptick/recovery come the New Year. Attentions today turn to the FOMC meeting minutes with little domestic data on hand to drive direction.
We expect a range today of 0.6380 – 0.6550
Great British Pound:
The Great British Pound found support through trade on Tuesday climbing marginally against its US counterpart. Despite a softening in annual price pressures core inflation unexpectedly climbed 1.1% offering some hope that inflation will recover through 2016 and perhaps narrow the gap in diverging monetary policies. Having struggled to break outside ranges between 1.50 and 1.55 since late September support is forming on breaks below 1.51 and although we expect Sterling to test the lower end of this recent trading bracket a definitive monetary policy movement is needed to severe the points of technical support and resistance.
We expect a range today of 2.1250 – 2.1550
Majors:
The U.S dollar advanced through trade on Tuesday after a marginal increase in CPI inflation helped cement expectations the Fed will increase the benchmark interest rate for the first time in nearly a decade. The Greenback advanced against it European and Japanese counterparts touching 1.0631 and 123.48 respectively marking highs not seen since April. It seems the market has all but priced in a December rate adjustments and today’s CPI print will do little to dissuade the Fed and FOMC voting members. As the burgeoning gap between FOMC and ECB monetary policy becomes more apparent the chatter surrounding a move to parity in EUR/USD increases. Many analysts suggest the 19 nation unit will succumb to new lows if as expected the ECB extends its QE program and reduce the depo rate when it next meets in December. With support forming around 1.0450 and April highs markets seem content to sit on the sideline before testing new lows waiting for a definitive policy outline. Attentions turn today to FOMC meeting minutes for direction through Wednesday with any hint of a divide or dovish leaning likely to prompt a panicked USD repositioning.
Data releases:
AUD: RBA Assistant Governor Debelle Speaks, CB Leading Index, MI Leading Index and Wage Price Index.
NZD: No Data
JPY: No Data
GBP: 10 Year Bond Auction
EUR: No Data
USD: FOMC Member Dudley Speaks, Building Permits, Housing Starts, Crude Oil Inventories and FOMC Meeting Minutes.