Australian Dollar:
The Australian dollar eased lower through trade on Friday having enjoyed a Kneejerk reaction and upward rally in response to the Federal Reserve’s decision to leave rates unchanged. Analysts had largely anticipated the world’s largest Central Bank would maintain the status quo but were surprised by the dovish undertones and strong emphasis/influence of global growth conditions. The Fed’s outlook has certainly been clouded by a collapse in global equities and sharp slowdown in growth prospects but many anticipated an upbeat rhetoric would accompany the Fed’s policy decision, especially given the continuing labour market strength. The AUD touched session highs at 0.7276 before technical supports kicked in and investors defended USD longs sending the AUD back below 0.72. While there is still an expectation the Greenback will strengthen into the end of the year as investors continue to reposition themselves for a December rate adjustment any shift in outlook and hint the Fed will delay adjusting rates into 2016 could spark a further softening in USD and prompt a consolidation for the AUD above 0.70.
We expect a range today of 0.7080 – 0.7280
New Zealand Dollar:
The New Zealand dollar bounced higher through trade on Friday following the Federal Reserve’s decision to leave rates unchanged. The dovish undertone and commentary from the world’s largest Central Bank helped fuel a return to riskier/higher yielding assets and the Kiwi jumped through 0.64. Technical supports meant advances beyond 0.6450 were quashed and the NZD opens this morning buying 0.6361 U.S cents. The NZD remains under pressure and is vulnerable to further depreciations into the end of the year as the RBNZ position themselves for additional interest rate cuts.
We expect a range today of 0.6250 – 0.6450
Great British Pound:
Cable rallied through Friday bouncing through 1.55 and 1.56 in a kneejerk response to the Fed’s decision to maintain the current policy stance and offer a dour outlook/analysis of global growth conditions. Sterling touched 1.5649 before resistance sent the currency lower and we open this morning buying 1.5515 U.S cents. Attentions now turn to diverging monetary policies and with growing expectations the Federal Reserve will push policy changes into 2016 there is scope for a short term swing upward as investors pare USD long bets.
We expect a range today of 2.1400 – 2.1720
Majors:
After a whole lot of fanfare the Fed’s decision to leave the current monetary policy platform unchanged Thursday disappointed investors seeking a normalisation in interest rates. While the market had largely anticipated the Central Banks call the dovish tone and somewhat dour outlook toward global growth forced a kneejerk and rapid sell off of USD. The prospect of an extended period of accommodative monetary policy sparked demand for emerging market and commodity based assets as risk appetite fuelled a rally in South African Rand, AUD and NZD through early trade on Friday. Speculators continue to pare bets USD gains and dollar long positions have fallen to their lowest levels in over 4 months. The Greenback edged lower against both the JPY and Euro through trade on Friday before technical supports helped stop the downward spiral and the EUR/USD opens the week buying 1.1278. Attentions now turn to the ECB and BoJ and expectations the respective Central Banks will extended their own quantitative easing platforms in a bid to combat falling inflation and commodity prices. Diverging monetary policies will govern market direction through the end of the year as analysts position themselves for a December Federal Reserve lift off.
Data releases:
AUD: No Data
NZD: Westpac Consumer Sentiment, Visitor Arrivals and Credit Card Spending
JPY: No Data – Bank Holiday
GBP: Rightmove HPI m/m
EUR: German PPI and German Buba Monthly Report
USD: Existing Home Sales and FOMC Member Lockhart Speaks