Australian Dollar:
The Australian Dollar lost ground yesterday closing at 0.7212 after the Shanghai Composite stock index closed more that 3% lower and copper prices plunged off the back of uncertain demand from China. The weakness in China saw investors move away from the AUD and into the relative safety of the USD as the close trading links between Australia and China make it susceptible to any Chinese weakness. Attention today will be directed the NAB Quarterly Business confidence data which will be released today at 11:30.
We expect a range today of 0.7160 – 0.7300
New Zealand Dollar:
The New Zealand dollar edged lower through trade on Wednesday as investors’ appetite for risk waned following a slump in Chinese equities. Having suffered a sharp selloff in the aftermath of a drop in milk and dairy prices the Kiwi remains under pressure breaking below 0.6750 and touching intraday lows of 0.6697. New Zealand’s ties to China as a key importer of dairy produce and concerns the world’s second largest economy will continue to slowdown weighed heavily on the NZD and we open this morning having found some support at 0.6718. Attentions turn offshore to again ahead of next weeks all important Trade Balance and RBNZ rate statements.
We expect a range today of 0.6680 – 0.6780
Great British Pound:
The Great British Pound again struggled to excite investor action failing to break away from ranges and bounced about between 1.5415 and 1.5475. Range bound for much of the week thus far attentions turned to BoE governor Mark Carney as he offered commentary on a possible split between the UK and EU. Carney highlighted the benefits of EU membership but was careful not to offer any political alignment simply citing the pros and cons from the Central Banks perspective. The comments did little to incite traders and we swap hands this morning at the lower end of recent ranges buying 1.5417. Attentions turn to retails sales for domestic directional guidance while the ECB’s press conference remains the big ticket item on today’s economic docket.
We expect a range today of 2.1250 – 2.1550
Majors:
The Greenback advanced across the Yen, emerging market and commodity linked currencies through trade on Wednesday after a 3% drop in Shanghai Composite raised concerns surrounding Chinese financial stability. Volatility across Asian equity markets prompted traders to dump the Aussie, Kiwi and emerging market currencies like the South African Rand and Mexican Peso because of their close trading link with the world’s second largest economy. The USD advanced against the safe haven JPY as the Yen slid following softer than anticipated trade balance numbers. Exports grew at their slowest pace in over 12 months as weakness in China dampens demand and raises the question, will the BoJ be forced to increase the current quantitative easing program as the economy appears headed for another recession. Touching intraday highs at 120.09 USD/JPY opens this morning only marginally lower buying 119.92. With little movement in EUR/USD overnight attentions turn to the ECB rate announcement and accompanying rate statement/press conference as the big ticket item driving direction through trade. We expect the ECB will maintain the status quo following commentary from key officials and stronger than expected regional data but investor ears will be keenly attuned for any dovish undertones that may act as markers toward a future policy path.
Data releases:
AUD: RBA Assist Governor Edey Speaks and NAB Quarterly Business Confidence
NZD: No Data
JPY: No Data
GBP: Retail Sales and MPC Member Cunliffe Speaks
EUR: Spanish Unemployment, Minimum Bid Rate and ECB Press Conference
USD: Existing Home Sales, Unemployment Claims and HPI m/m