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Euro rallies as expectations for tapering in QE program escalate

By Matt Richardson

The Australian Dollar inched higher intraday on Tuesday against the Greenback following a strong report on the monthly NAB Business Confidence survey. The report indicated that Australian business conditions have climbed above its long-term average in September and reversed last months losses. The AUD/USD before the release was buying 0.7746 and jumped up 40 pips to 0.7786. Overnight the pair touched what is seen as resistance of 0.7797 but has since settled back down. Today sees the release of Westpac Consumer Sentiment for October but is unlikely to have an impact on the Aussie

The New Zealand dollar edged ever so slightly higher through trade on Tuesday and offered little to excite investors as it struggled to break outside a 25-point trading band. Soft macroeconomic data and ongoing political uncertainty saw the NZD test supports at 0.7060 U.S cents and forced the currency lower against key crosses, breaking below 0.91 AUD and touching 0.5350 British pence. With little data on hand to drive direction today attentions turn to the Federal Reserve’s FOMC meeting minutes for wider direction. A consolidated break below support at 0.7060 and 0.7030 could force a break back through the psychological 0.70 and opens the door for moves toward 0.6920. 

The Great British Pound found the impetus it needed to force its way above 1.32 for the first time this week. Opening this morning at 1.3202, the Sterling posted a gain of approximately 0.5% in overnight trading, buoyed by a weakening Greenback and stronger than expected Manufacturing Production numbers. According to the official release, industrial production rose 1.6% in August year on year while manufacturing production rose 2.8% in the same period, a result that is well above expectations. The Cable now turns to a jam-packed Friday for direction with one ear open for any news out of Brexit talks in Brussels. 

The US Dollar moved lower through trade on Tuesday as investors cautiously squared positions ahead of today’s FOMC meeting minutes. Falling US treasury yields and fresh rumours not all Republican Senators will support President Trumps tax reform did little to enamour investors’ appetite for USD. The Dollar fell to a one-week low against the Euro as the 19 nation shared unit broke back through 1.18 to touch intraday highs at 1.1821. The Euro found renewed support as German exports outperformed while market expectations for a tapering in the ECB’s Quantitative Easing platform escalated. The ECB is expected to signal a reduction in its bond buying program later this month as a string of macroeconomic data sets have renewed optimism in the wider EU economic recovery and driven the Euro higher. Attentions now turn to the FOMC meeting minutes for direction through trade today as investors seek affirmation the Fed is on track to meet scheduled interest rate adjustments. Analysts will be keenly attuned to any change in rhetoric as diverging monetary policy expectations drive direction.