Daily Currency Update

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Greenback underpinned awaiting the Federal Reserve

BY SHAMEEM MUSA

The Australian dollar opens this morning little changed when valued against its US Counterpart at 0.7536. A fairly quiet session yesterday on the macroeconomic data front saw the Aussie trade within a 40-pip range (0.7564 – 0.7524) against the greenback. National Australia Bank's monthly business survey, the only scheduled release yesterday, showed a fall in confidence from +13 to +7 index points in the month of May. Despite the drop-in business confidence, the business sector is looking quite upbeat. Looking ahead today and at 10.30am AEST will see the release of Westpac’s monthly consumer confidence index. The AUD/USD pair is currently trading at 0.7533. We now expect support to hold on moves approaching 0.7500 while any upward push will likely meet resistance around 0.7565.

The New Zealand dollar touched three and a half month highs through trade on Tuesday, breaking back through 0.72 U.S and touching intraday highs at 0.7228. Buoyed by wider USD weakness investors continued to push the current NZD upturn ahead of today’s Federal Reserve and FOMC monetary policy statement. Analyst anticipate the Fed will raise the benchmark cash rate, meaning investors focus will be largely drawn to the commentary that accompanies the rate announcement and signals relating to policy normalisation. Any hint the Fed plans to trim its balance sheet before the end of the year will force a reshuffle in expectations. With resistance forming on moves toward 0.7245/50 and 0.7290/7300 investors will need a distinctly dovish statement to drive further NZD upside, while a hawkish and aggressive appraisal of future monetary policy could spark a USD recovery and force the NZD back toward supports at 0.7130/0.7100.

Short term relief has been found for the Great British Pound overnight as it attempts to recover from its recent trough caused by Theresa May's snap election. Starting the day 1.2660, Cable recovered from two month lows to 1.2750 overnight as UK inflation figures for the month of May rose to 2.9%. The lower Sterling of late continues to impact the price of imports as core components such as consumer goods and packaged holidays were the main causes for the increase. Despite hitting near four-year inflation highs, the Bank of England has previously stated it is not concerned with current levels of inflation above its targeted band of 2% inflation, as economists predict it could be close to peaking mid-year. In Theresa Mays meeting with Macron overnight it was made clear that Brexit negotiations remain on track despite current political instability. Sterling opens steady this morning against the US Dollar at 1.2750. The Great British Pound is also higher against the Australian dollar 1.6925 and Kiwi 1.7660.

The Euro was almost unchanged against the U.S Dollar currently changing hands at 1.1210 at the time of writing. The pair did initially edge lower in the Asian session but recovered in European trade moving between levels of 1.1185 and 1.1225 as investors eagerly await the interest rate decision by the US Federal Reserve which is due to be released at 4am Australian Eastern Standard time. On the data front German ZEW Economic Sentiment dropped unexpectedly in June to 18.6 points from 20.6 in May which is below the indicator’s long-term average of 23.9. In the US, PPI figures releases were unchanged in May, meeting consensus expectations. The flat result reflected a fall in gasoline prices, while services prices increased. The Core price which excludes food and energy increased 0.3% being higher that expectations, PPI is considered to be a leading indicator of inflation for the Federal Reserve.