Australian Dollar
Expected Range 0.7140 – 0.7340
The Australian dollar fell sharply through trade on Wednesday touching near 3 month lows at 0.7218 following the release of the U.S Federal Reserve’s May FOMC meeting minutes. Investor’s responded to calls the Fed would look to amend interest rates as early as June should market and economic data suggest improvements in growth throughout the 2nd quarter. The minutes underpinned Tuesday’s upbeat inflation, housing and industrial production numbers and open the door for further USD gains as a pessimistic market scrambles to keep pace with Fed expectations. Analysts are now pricing in a 35% chance of a rate hike in June and will be closely monitoring macroeconomic indicators through the next 4 weeks for any indication the U.S economy is on the rebound. The meeting account highlights the divergence in policy outlooks between the FOMC and RBA and leaves the AUD in a vulnerable position. As expectations of U.S policy action increase moves toward and through 0.72 and 0.70 appear more and more likely. Attentions now turn to domestic employment and labour market data. Strong reads will support calls for a shift back toward neutral monetary policy while a soft print could prompt further speculation the RBA will cut rates again before years end.
New Zealand Dollar
Expected Range 0.6575 – 0.6875
The New Zealand dollar suffered a sharp selloff throughout trade on Tuesday as investors reacted to the Federal Reserve’s May meeting account. The FOMC meeting minutes signalled policy makers were prepared to raise rates as early as June should economic data cooperate and suggest rebound in growth following a sluggish first quarter. The Kiwi plunged through 0.68 to touch intraday lows at 0.6730 and open this morning buying just 0.6726 U.S cents. Attentions turn again to offshore stimuli with the Philly Fed Manufacturing Index and U.S unemployment claims dominating the docket through Thursday.
Great British Pound
Expected Range 1.9850 – 2.0650
The Great British Pound shrugged off a surging U.S dollar rally through trade on Wednesday advancing to touch two weeks highs at 1.4634 while surging back through 2.02 against the AUD. Brexit opinion polls released by the Evening Standard showed the stay vote garnering further support from Britons. Sterling direction has been underpinned by market sentiment and expectations surrounding the likely result of the June 23 referendum and investors continue to adjust positions as the all-important vote draws nearer. As if to highlight the importance of political pressures investors largely ignored Tuesday poor inflation report and Wednesday upbeat labour market assessment with direction through coming month likely to come primarily from political expectations and Brexit fears.
Majors
Expected Range N/A
The U.S Dollar jumped sharply higher through trade on Wednesday following the release of the Federal Reserve’s May meeting minutes. The meeting account intimated the FOMC would hike interest rates as early as June if macroeconomic indicators continued to support stronger second quarter growth. Investors responded and Fed funds futures increased across the board with nearly 35% of analyst pricing in a June amendment while monetary policy action in September and/or December are now firmly priced in. The comments underpin a string of stronger data sets namely Tuesdays upbeat monthly inflation print and improving industrial production. The Greenback rallied to touch three week highs against both the Euro and Japanese Yen on Wednesday touching 1.1210 and 110.25 respectively. Attentions now turn to the Philadelphia Federal Reserve’s manufacturing Index and unemployment claims for direction through Thursday. A strong print across both fronts could help strengthen calls the economy has bounced back from a sluggish first quarter and improve further market expectations for a June rate hike. The Fed has consistently intimated the market has been overly pessimistic leaving the door open for a bullish swing should data cooperate.