Daily Currency Update

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Greenback dominates the currency and commodity markets

BY SHAMEEM MUSA

The Australian Dollar moved higher against its US counterpart yesterday reaching a top of 0.7631. The lift in the Aussie followed stronger than expected labour market data. In May, the unemployment rate fell to 5.5% beating expectations of 5.7%. A drop in the wider unemployment rate and better than anticipated upturn in new jobs created (42,000 new jobs in May) have enabled the AUD to extend through the 0.76 mark, touching its highest level in 2 months. The AUD/USD pair is currently trading at 0.7581. We now expect support to hold on moves approaching 0.7560 while any upward push will likely meet resistance around 0.7630. 

The New Zealand Dollar edged marginally lower through trade on Thursday sinking back below 0.7250 after a softer than expected quarterly GDP print. The domestic economy expanded at a slower pace than analysts predicted growing just 0.5% through the first 3 months of 2017. Losses were further compounded as the Greenback found momentum in the Fed’s upbeat commentary and a stronger USD forced the Kiwi toward intraday lows at 0.7187. Having enjoyed strong gains throughout the last month the NZD is perhaps now due for a correction and a consolidated move back toward 0.71 and 0.70 are possible through the short to medium term. Attentions now turn to local manufacturing data for direction into the weekend.

Losses on the Great British Pound yesterday were clawed back as the BoE kept their interest rates at record lows and maintained their asset purchasing program. Despite trading steady at 1.2750 in early morning trading in the UK, Sterling drifted to an intraday low of 1.2690 in the lead up to the release of the UK official bank rate as UK retail sales disappointed. Surprising the markets was not a hold on rates but the 5-3 vote count by MPC members whereby it was expected the count would be 7-1. Market expectations were not expecting such hawkish behaviour by members Michael Saunders and Ian McCafferty, joining Kristin Forbes in their attempt to start raising rates sooner. With a high inflation reading this week and the potential to go higher this year, there is now a 50% probability of a hike by the BoE before the end of 2018. Cable shot up immediately to the daily high of 1.2790 before drifting lower at the close of the North American trading session and opens this morning square at 1.2750. The British Pound also opens higher against the Australian dollar at 1.6825 and New Zealand Dollar – 1.7700.

The Greenback outweighed the Euro during Thursdays day of trade as markets continued to digest the Federal Reserve policy announcement which to many’s surprise had a slight of a hawkish tone. Investors weighed up the prospects of a further rate hikes this year with December in sight for the third, longer-term US dollar strength could be in the pipeline after quite some time.  On the data front, the EU recorded a €17.9bn surplus in trade in goods with the rest of the world compared with €145.9bn for April 2016, the figures has little impact to the pair. The US dollar extended its gains in the New York session with a raft of upbeat data out of the States. New York Manufacturing Index jumped sharply to its highest level in three-years to 19.8, Initial Jobless Claims fells for the week ending June 10th from 245k to 237k which continue to signal healthy labour markets. The stronger US Dollar has weighed on the many commodity prices as well with both oil and gold lower.