Australian Dollar:
The Australian dollar held onto gains enjoyed in the aftermath of the RBA’s rate announcement through trade on Wednesday edging higher as investors squared position in the lead up to the release of the Federal Reserve’s March meeting minutes. Having touched intraday highs of 0.7726 the Aussie eased as the world’s base currency found support amongst a hawkish Fed Tone. While a short term rally is still a possibility another break above 0.78 is unlikely and certainly not a level that will be sustained in the current environment. Friday’s weak US jobs data and the RBA’s decision to refrain from cutting rates were the two major market catalysts that could have supported AUD upside risk. Having failed to break outside ranges between 0.75 – 0.78 we may be entering a new period of consolidation as investors seek further monetary policy guidance. Attentions now turn to Chinese CPI numbers Friday for direction into the weekend.
We expect a range today of 0.7520 – 0.7750
New Zealand Dollar:
With no domestic data available to steer currency direction the New Zealand dollar looked to offshore data events for stimuli. Edging upward throughout the early part of the North American session the Kiwi took advantage of investors squaring positions ahead of the Fed meeting minute’s release. Touching highs of 0.7606 the currency moved lower as markets absorbed the FOMC’s meeting notes identifying an underlying hawkish tone that was not present in the post meeting address proffered by Fed chair Janet Yellen. Again the domestic docket is free of headline data and we expect the Kiwi will struggle to break outside recent ranges through trade Thursday.
We expect a range today of 0.7480 – 0.7650
Great British Pound:
Cable edged upward through early European trade yesterday as markets prepared for what they expected would be a dovish U.S Fed meeting minutes. Touching highs just shy of 1.4970 Sterling eased as an underlying hawkish tone was noted as FOMC policymakers failed to agree on the timing of U.S monetary policy normalisation. Domestic data offered little support as market attentions are squarely pointed toward today’s Bank of England policy meeting and rate announcement. Given February’s 0% inflation read investors will be keenly looking to the BoE’s Monetary Policy Committee for direction and guidance.
We expect a range today of 1.9110 – 1.9590
Majors:
Marking a third consecutive daily advance the Greenback, having eased in early trade, ticked upward in the wake of the Federal Reserve’s release of its March 17-18 policymakers meeting minutes. Investors were expecting an underlying dovish tone but minutes revealed FOMC board members were split in adjudicating the timing of a normalisation in monetary policy. The split shed a hawkish or upbeat light on market expectations and left the door open for a June rate increase. While a June rate hike is becoming increasingly unlikely, especially as the dust settles over last week’s dismal jobs data, the promise that is remains a possibility was enough to buoy market action. As monetary policy continues to guide currency direction the U.S. Federal Reserve is the only central bank amongst developed economies looking to tighten its monetary policy stance. In an environment wherein 30 policy moves were recorded globally throughout January and February the promise of a rate hike before the end of 2015 will continue to boost demand for the USD. Attentions now turn to unemployment claims for direction through Thursday as markets look for signs the labour market will continue to improve. Another poor NFP print in May could rule out a rate advance and push the timeline of Fed policy adjustment into 2016.
Data releases
AUD: AIG Construction Index
NZD: No Data
JPY: 30 Year Bond Auction and BoJ Monthly Report
GBP: Official Bank Rate, MPC Rate Statement, Asset Purchase Facility, Trade Balance and Halifax HPI m/m
EUR: German Industrial Production m/m, German Trade Balance and Spanish 10 Year Bond Auction
USD: Unemployment Claims, Wholesale Inventories and 30 Year Bond Auction.