Daily Currency Update

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All eyes on FOMC

By MATT RICHARDSON

The Australian Dollar has climbed back through Tuesdays day of trading against the Greenback buying above the 80c handle, overnight it touched a high of 0.8020. The minutes from the latest Reserve Bank policy meeting showed that the bank is more positive about the domestic outlook and are upbeat on the labour market. Despite this the notes of caution still remain with the RBA and they are unlikely to look at raining rates anytime soon. In other news, House Price Index came in at 1.9% in the June quarter vs an expected 1.2% gain which was the likely driver behind the Aussie push towards 80c. RBA assistant governor is due to speak today at a the Australian Business Economists Lunchtime Briefing in Sydney but markets will be keenly attuned to the Fed which is due to announce plans to begin unwinding it’s $4.5 trillion balance sheet.  

The New Zealand dollar is stronger this morning when valued against the Greenback. The Kiwi reached an overnight high of 0.7326. Over the last few weeks the NZD/USD currency pair has ranged between 0.7200 and 0.7350, capped by election uncertainty, and by the downward trend in the Greenback. Looking ahead this week and traders are now preparing for the release of the quarterly GDP report on Thursday and the country's general election on Saturday. The NZD/USD pair is currently trading at 0.7314. We now expect support to hold on moves approaching 0.7240 while any upward push will likely meet resistance around 0.7329.

With little headline data on hand Tuesday markets offered little to excite investors as a largely uneventful session saw the GBP see saw between intraday lows at 1.3470 and highs at 1.3552. Sterling found support early following reports Boris Johnson would quit parliament if his Brexit demands were not met. Johnson is seen to be hampering Prime Minister May’s push for a softer Brexit and the reports emboldened some analysts hopes that his secession would pave the way for simpler negotiations. The reports however were rebuffed by the former London Mayor and the small rains were lost as markets square positions into what will be an all-important domestic retails sales print and FOMC rate statement.   

The US dollar weakened through trade on Tuesday edging lower against a basket of major currency counterparts as investors square positions ahead of what is a critical Fed and FOMC policy meeting. It is widely anticipated the Open Market Committee will announce plans to begin tapering its Quantitative easing program as early October and the expected slowdown in bond purchase signals a wider tightening in monetary policy conditions, with an eye to a possible rate hike in December. Falling through 111.50 JPY and giving up 1.20 against the Euro investors are poised for an adjustment in short and medium term outlooks.