Australian Dollar:
Despite early chatter surrounding a possible RBA rate cut the AUD enjoyed a relatively quiet domestic session maintaining a tight trading range between 0.7200 and 0.7240 before rallying through overnight trade touching session highs above 0.7300 at 0.7317. Softer than anticipated U.S retail sales and a weaker PPI (Producer Price Index) print extended the timeline of expectation surrounding Federal Reserve policy action. When combined with increasing concerns surrounding global growth prospects following a reduction in Chinese price pressures and a dip in global equities the demand for U.S stocks and dollars eased. Futures markets are now pricing in a 34% chance of Fed movement in December while a January 2016 change is struggling to garner momentum. To date investors continue to reduce USD long bets as the likelihood monetary policy will remain accommodative into March increases. Attentions turn today to unemployment claims for domestic direction while U.s Inflation numbers dominate the international economic calendar.
We expect a range today of 0.7150 – 0.7390
New Zealand Dollar:
The New Zealand Dollar led gains among major currencies Wednesday following softer than anticipated U.S retail sales and comments from RBNZ governor Graeme Wheeler. The Central Bank chief alluded that while further rate cuts may be necessary there are limits as to how far the board is willing to go suggesting the potential for looser monetary policy is somewhat limited. The Kiwi rallied through 0.67 and 0.6750 touching intraday highs of 0.6814 before edging lower to open this morning buying 0.6785 U.S cents. Attentions today turn to local manufacturing data while a U.S inflation report dominates international macroeconomic news.
We expect a range today of 0.6625 – 0.6925
Great British Pound:
The Great British Pound recouped losses suffered early this week rallying throughout trade on Wednesday. Sterling moved through 1.53 and 1.54 touching intraday highs at 1.5492. Stable average earnings and a reduction in unemployment coupled with softer than anticipated U.S retail sales and producer price pressures helped fuel cable demand as investors extend the timeline of expectation surrounding Fed policy action and the monetary policy gap closes. With little domestic data on hand attentions now turn to U.S inflation data for direction through trade on Thursday.
We expect a range today of 2.1000 – 2.1400
Majors:
The Greenback followed global equities lower through trade on Wednesday touching 4 week lows against the Euro and relinquishing recent gains against commodity driven and emerging market currencies. A softer than anticipated retail sales and core retail sales print served only to heighten expectations the Fed will be forced to extend its accommodative monetary policy stance into 2016. Retail sales rose just 0.1% in September while the Commerce Department revised down August sales to reflect no change and when paired with a reduction in producer prices there is mounting evidence that the world’s largest economy is losing momentum. The weaker than anticipated data does little to close the gap/divide forming among Fed officials and with a limp Chinese inflation report adding to concerns domestic economic conditions continue to weaken there is an ever increasing case for the Fed to delay rate amendments in the face of global economic sluggishness. Attentions turn today to U.S inflation and core CPI numbers as a critical marker of economic health and future Federal Reserve policy moves.
Data releases:
AUD: MI Inflation Expectations, Employment Change, Unemployment Rate and New Motor Vehicle Sales m/m
NZD: Business NZ Manufacturing Index
JPY: Revised Industrial Production and Tertiary Industry Activity
GBP: No Data
EUR: Spanish 10 Year Bond Auction
USD: CPI and Core CPI, Unemployment Claims, Empire State and Philly Fed Manufacturing Indexes, FOMC Member Dudley Speaks and the Federal Budget Balance.