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U.S dollar edges higher and Yen tumbles as central bank outlooks come back into focus


The Australian Dollar opens fractionally lower bouncing around levels of 76c against the U.S dollar as New York Fed president Dudley reinforced expectations of further increases in interest rates. He noted that inflation was a little lower than what they would like but if the labour market continues to tighten, wages will gradually pick up and with that inflation will gradually get back to their targeted 2 percent. Locally, in Canberra yesterday, the RBA governor Phillip Lowe said that over the next couple of years Australian economic growth will “be a bit stronger than it has been recently” also noting that “as things currently stand, it looks likely that average growth in per capita incomes over the next quarter of a century will be lower than over the past quarter of a century. We should, though, be capable of stronger growth than we have seen over the past few years”, the Governor was optimistic on the global economy with 2017 seeing some improvement overall still adding there are still some risks. The AUD/USD pair currently buying 0.7599 against the Greenback with 0.7630 still seen as strong resistance.

The New Zealand Dollar opened the week at 0.7250 and failed in its attempt to break through 0.73 once again. Rallying early in Monday mornings Asian session after strong Westpac consumer confidence, the Kiwi gained some 50 pips against the U.S. Dollar. Profit taking resumed as the NZD/USD cross paired all gains heading into offshore sessions as an upbeat FOMC member William Dudley drove the U.S. dollar higher in overnight trading. NZD/JPY hit three month highs yesterday of 81.00 as the New Zealand dollar takes further direction from the GlobalDairyTrade Auction this evening, opening lower this morning at 0.7220.

The Great British Pound started the session strong against the US Dollar reaching a high of 1.2814 before fading after the official start of Brexit negotiations in Brussels. It has now been a full year since the Brexit referendum. The UK's David Davis and the EU’s chief Brexit negotiator Michel Barnier slammed the door on any prospect of a “soft” Brexit. Michel Barnier also said he was "not in the frame of mind to make concessions or ask for concessions". As a result, the GBP/USD pair fell to an overnight low of 1.2723. The Pound is currently trading at 1.2769. We now expect support to hold on moves approaching 1.2710 while any upward push will likely meet resistance around 1.2760. 

The U.S Dollar edged marginally higher through trade on Monday buoyed by ongoing and upbeat commentary from the FOMC and key Fed officials. New York Fed President William Dudley reiterated the Fed’s commitment to tighter monetary policy suggesting the open market committee still believes the labour market will fuel an uptick in inflation and allow the Fed to raise rates again before the end of the year. The hawkish tone renewed demand for the worlds base currency and drove a rally through 111.50 JPY. The USD touched a two week high against the Yen as analyst compare Central Bank Monetary policy outlooks and comments from BoJ President Kuroda who last week made clear the BoJ’s commitment to its current stimulus plan. As the focus turns again to central bank policy expectations attentions today will be governed by commentary from FOMC members Fischer and Kaplan for wider direction.