Australian Dollar:
The Australian dollar rallied through trade on Thursday buoyed by a dramatic repositioning in EUR/USD following the European Central Bank’s disappointing policy announcement. The ECB failed to match market expectancies delivering an expanded quantitative easing platform that fell horribly short of investors’ expectations. The AUD bounced off technical supports throughout the domestic session and touched intraday lows at 0.7283 prior to the Mario Draghi press conference before rallying through resistance at 0.7335 and touching intraday highs at 0.7358. The move opens the door for further runs toward 0.74 and the next point of technical resistance at 0.7381 as investor attentions turn to domestic retail sales for direction through trade on Friday. A strong print will go a long way in affirming RBA governor Glenn Stevens latest commentary and cementing a long term neutral policy outlook ahead of today’s all important U.S non-farm payroll print and labour market health check.
We expect a range today of 0.7230 – 0.7440
New Zealand Dollar:
The New Zealand dollar rallied in the wake of the ECB policy announcement touching intraday day highs at 0.6691. Buoyed by demand for higher yielding assets and a Greenback selloff the Kiwi jumped almost 1 cent after testing supports at 0.6610 prior to the updated policy mandate. Having seemingly consolidated above resistance at 0.6681 there is still scope for further upside moves and a move through 0.67 should tonight’s all important U.S non-farm payroll numbers miss the mark.
We expect a range today of 0.6580 – 0.6780
Great British Pound:
The Great British Pound recouped much of the week’s heavy losses through trade on Thursday buoyed by a Greenback selloff as investors and traders scrambled to cover positions in the aftermath of the ECB policy announcement. Having touched 7 month lows at 1.4902 prior to the monetary policy update Sterling jumped 250 points through 1.5150 reaching intraday highs at 1.5154. An uptick in the services sector help cement the advance as attentions turn to U.S non-farm payroll numbers as a critical marker of Fed policy direction ahead of the December 15-16 FOMC meeting and press conference.
We expect a range today of 2.0350 – 2.0850
Majors:
Markets scrambled to cover Euro shorts through trade on Thursday after Mario Draghi and the ECB failed to meet market expectations in delivering an expansion to its Quantitative Easing program. The Euro touched near 8 month lows at 1.0506 in the lead up to the policy announcement as investors pared positions, speculating the ECB’s voting members would approve a significant rate cut and considerable extension to the duration of the current bond buying platform; pricing in the worst case scenario. Instead the ECB was somewhat divided and by no means unanimous in its forward policy mandate opting for what many analysts believe to be the bare minimum. Deposit rates were cut by from -0.2 to -0.3 while the asset purchase facility was extended just 6 months leaving the pace of buying unchanged at 60 billion euros a month. With markets anticipating at least a 20bp reduction to the deposit rate and an increase in the monthly bond buying facility today’s announcement simple falls well short of market expectations. The Euro surged through recent resistance levels breaking through 1.0950 and touching session highs at 1.0981. In context the Euro is still markedly below October highs and the ECB has left plenty of room to extend the stimulus program while the long term forecast remains relatively unchanged. Investors still anticipate a Fed policy amendment come December 15th and the path of divergence is still intact as attention turn to U.S non-farm payroll numbers and employment data as a critical marker for Fed policy direction.
Data releases:
AUD: Retail Sales m/m
NZD: ANZ Commodity Prices m/m
JPY: Average Cash Earnings y/y and Consumer Confidence
GBP: No Data
EUR: German Factory Orders m/m and Retail PMI
USD: Average Hourly Earnings m/m, Non-farm Employment Change, Unemployment Rate and Trade Balance Report.