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Aussie steady against US dollar

By OFX

The Australian dollar traded in a tight range again yesterday between 0.7165 and 0.7203. The Aussie dollar continues to remained under pressure amid the sour tone of US equities. The Reserve Bank of Australia released their Meeting Minutes which remained dovish, as policymakers seem less confident about the economy with persistent downside risk coming from slow income growth, high debt levels, and falling house prices.

On the release front today in Australia, a quiet day ahead, with the only release November Westpac Leading Index which previously came in at 0.08%.

From a technical perspective, the AUD/USD pair is currently trading at 0.7176. We continue to expect support to hold on moves approaching 0.7150 while now any upward push will likely meet resistance around 0.7210.

The New Zealand dollar is higher when valued against the US dollar after business confidence improved in December. The NZD/USD pair reached an overnight high of 0.6878 before settling down around 0.6850. The ANZ business outlook survey for December showed a net 24.1 per cent of firms surveyed expect general business conditions to deteriorate in the coming 12 months versus 37.1 per cent in November.

On the release front today and we saw the release of the Global Dairy Trade which showed prices rising for the second consecutive auction, breaking the multi-month run of price declines. NZ consumer confidence was also up 5.6 points to 109.1 in December shaking off its mid-year slump.

From a technical perspective, the NZD/USD pair is currently trading at 0.6844. We continue to expect support to hold on moves approaching 0.6787 while now any upward push will likely meet resistance around 0.6969.

The GBP is up from yesterday’s trading session to hit a one week high of 1.2692 against the USD despite a lack of news regarding Brexit. The Pound gained against the majority of the G10 currencies, exemplified by a broadly weaker USD after a recent slowdown in economic activity.

All eyes turn to the Brexit vote to be held mid-January where the possibility of a no-deal is very much real. An EU official has stated that if the UK fails to ratify the withdrawal agreement by 29th of March, there will be no managed ‘no deal’ process triggered and will take the steps necessary to put in a bare minimum of emergency measures.

The Pound opened at 1.2635 against the USD this morning.

The Dollars depreciation against most major counterparts continued through trade on Tuesday, touching a one-week low as investors unwound long positions ahead of today’s US Federal Reserve Policy meeting. Throughout the last six weeks the Fed has seemingly shifted course, suggesting interest rates at their current level are nearer neutral than previously signaled. Markets have been forced to re-calculate interest rate expectations amid speculation this month’s rate hike could be last in a predetermined cycle of monetary policy tightening.

Markets will be keenly attuned to accompanying Fed commentary and affirmation future rate hikes will be data dependent. Verification of this expectation could prompt an increase in future USD volatility as investors react to key macroeconomic data sets markers of future monetary policy shifts, a move away from broader central bank forward guidance.

With markets pricing in a 70% probability of a rate hike today, a surpirse abstention from the FOMC would prompt a sharp USD correction.

The Euro moved slightly higher in overnight trading, although remains strictly rangebound ahead of the all-important Federal Reserve meeting tomorrow morning. Opening this morning at 1.1365, the Euro looks to consolidate ahead of a busy day tomorrow.

The Euro had little to digest on the domestic calendar ahead of the holiday period. Nevertheless, there was some movements from the Euro’s counterpart as the Greenback softened ahead of the highly contentious Federal Reserve’s rate announcement tomorrow. With the looming announcement on the horizon, the Greenback weakened slightly but found support late in the day from a recovery in equity markets. Overall, the Euro maintains its neutral stance in preparation for the Federal Reserves policy statement.

Tomorrow morning is of key importance to market participants as they await the announcement from the Federal Reserve. Closer to home, the Euro is also set to enjoy the release of German month on month PPI. Across the channel, the UK prepares to release UK CPI, retail sales and their own monetary policy statement for market participants to digest.

The Canadian Dollar was sold off in droves overnight as the commodity based currency was hit by a 4% loss on WTI crude oil prices and 12% since December 4th. The USD/CAD pair opened just above the 1.3400 handle before climbing to an intraday high early this morning of 1.3496.

Further trouble for a declining loonie was seen overnight as Canadian manufacturing sales contracted by 0.1% for the month of October to $58.2 billion after lower sales at wood product and primary metal industries.

The Loonie gained momentum on open this morning as broader weakness for the greenback in the lead up to the latest Federal Reserve Interest Rate decision saw the USD/CAD position move lower to 1.3462, ending 0.4% higher for the day.

1.35 looks to be a short-term barrier for the USD/CAD in the lead up to this evenings release of Canadian inflation data whereby there is an expectation to see a decline in figures due to the recent drop in oil prices.