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Australian Dollar drifts lower to a two-week low under 78c

By SHAMEEM MUSA

The Australian dollars daily depreciation continued through trade on Tuesday falling back below 0.78 U.S cents. The AUD met ongoing selling pressure as demand for the US dollar increased on the back of reports John Taylor is firming as favourite to take over the Fed Presidency. A known hawk markets expect Taylor could set the Fed upon a faster pace of monetary policy tightening and bolster yield returns on USD. Touching intraday lows at 0.7771 the Aussie found support amid concerns Trump’s tax reform bill may still meet headwinds through the senate as key republicans appear unlikely to seek re-election in the midterm primaries. With support still intact at 0.7730 attentions now turn to quarterly inflation prints today as a key marker for short to medium term direction. A soft read would only support the RBA’s neutral policy stance and likely compound recent losses while an upbeat print could embolden bulls to push the Aussie back through 0.78 and 0.7850. 

The New Zealand Dollar was one of the worst performing G10 currencies overnight following the commencement of fiscal announcements by new Prime Minister Jacinda Ardern yesterday afternoon. Initially the Kiwi was bolstered to test the 0.70 handle after signing an agreement to form coalition with NZ First. All gains were quickly erased after the incoming PM announced a review was required of the Reserve Bank Act, and the possibility of cuts to immigration. Sharp declines were seen immediately and finished over 1% lower for the day, as the NZD/USD eventually bottomed out at 0.6887 in the North American session. The New Zealand Dollar opens this morning at 0.6905.

The Great British Pound is weaker today when valued against its US counterpart falling overnight to 1.3113, after another failed attempt to surpass the 1.3230 region earlier in the day. The UK macroeconomic calendar had little to offer yesterday with no scheduled data releases. Looking ahead today and all attentions turn to Q3 GDP figures with the economy expected to have grown by 0.3% in the three months to September, unchanged from Q2 reading, while the annualized figure is forecasted at 1.4% from previous 1.5%. The GBP/USD pair is currently trading at 1.3130. We now expect support to hold on moves approaching 1.3095 while any upward push will likely meet resistance around 1.3150. 

The Euro remains on the back foot against the US dollar but has managed to hold onto to what is seen as short-term support around the 1.17 handle. The EUR/USD pair moved within a 50-pip range on Tuesday touching a low of 1.1742 and high of 1.1792. Lending support to the EUR was the Eurozone headline PMI manufacturing data improving to 58.6 as the moderation in output was offset by a strong rise in the employment index. The Euro ‘Flash’ PMI disappointed falling from Septembers four-month high to 55.9. Markets are bullish for the Greenback in anticipation of the Federal Reserve Presidency being announced and Euro likely to remain supported for now at least until tomorrow’s ECB’s meeting.