Australian Dollar:
The Australian dollar edged lower through trade on Monday pulling back from 4 week highs and opens this morning buying 0.7130 U.S cents. With little domestic data to hand the Australian dollar took its cues from offshore stimuli and followed emerging market currencies lower as the rally following the Fed’s decision to delay rate adjustments eased. Investors looked to buy back into the Greenback on comments from three Fed policy makers and FOMC representatives all of which suggested a 2015 rate hike was likely and that there was a strong case to tighten monetary policy last week. The diverging interest rate outlook helped fuel a USD run and the Aussie suffered a measured but consistent sell off. The local economic docket is again free of headline data and we expect investors will remain largely sidelined leading into the end of the week wherein focus will turn to key Chinese manufacturing reports, US quarterly GDP data and commentary from Fed President Janet Yellen.
We expect a range today of 0.7050 – 0.7200
New Zealand Dollar:
The New Zealand dollar followed emerging market currencies and its antipodean partner lower through trade on Monday moving back below 0.64 as Fed officials backed monetary policy action before years end. Atlanta Fed President and FOMC representative Dennis Lockhart backed comments made by fellow policy makers in calling for a rate adjustment before the end of 2015 suggesting “there is a powerful case to be made for tighter monetary policy”. The comments reinstated support of USD long bets and forced a Kiwi sell off as diverging interest rate outlooks become a primary focus/marker in driving currency direction.
We expect a range today of 0.6220 – 0.6380
Great British Pound:
The Great British Pound moved lower Monday edging back below 1.5500 as investors reacted to hawkish commentary from key Fed and FOMC officials suggesting a rate hike before years end was still very much on the table. The divergence in monetary policy outlooks will be the primary driver/marker influencing currency direction and as the prospects of a BoE rate amendment remain thin Cable is likely to come under increasing pressure.
We expect a range today of 2.1575 – 2.1975
Majors:
The U.S Dollar strengthened through trade on Monday, recouping some of the losses suffered since the FOMC elected to keep interest rates near zero last week. The World’s base currency found support in diverging monetary policy outlooks following commentary from key Federal Reserve and ECB policy makers. St Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart backed calls made by the Fed’s San Francisco representative John Williams suggesting a 2015 rate hike was still likely and that “a powerful case was to be made” for tighter monetary policy. The hawkish comments were what the market expected of last week’s FOMC press conference and reinstated investor confidence in rate hike prospects. In contrast ECB Chief Economist Peter Praet confirmed the European Central Bank is poised to add additional stimulus, increasing its bond buying program should the current path of economic uncertainty continue and inflationary pressures fail to increase. The Euro edged below 1.12 touching intraday lows of 1.1180 and open only marginally higher this morning buying 1.1187. Focus now turns to the respective Central Bank heads Mario Draghi and Janet Yellen as both hit the wires this week. Analysts will be keenly attuned to any comment that may offer insight into future monetary policy strategy.
Data releases:
AUD: HPI q/q
NZD: No Data
JPY: No Data – Bank Holiday
GBP: Public Sector Net Borrowing, CBI Industrial Order Expectation and MPC Member Shafik Speaks
EUR: Consumer Confidence
USD: HPI m/m and FOMC Member Lockhart Speaks