Home Daily Commentaries A big week of news ahead

A big week of news ahead

Daily Currency Update

This week is packed with events offshore and the AUD will likely spend the first half of it buffeted by what’s happening elsewhere. In the United States there’s an FOMC meeting on Wednesday and whilst investors can be confident there’ll be no change in monetary policy, the statement will be watched carefully for clues about a December rate hike. Perhaps more importantly, the White House has said that President Trump will announce his pick for the next Fed Chair before he departs for a trip to Asia on Nov 3rd. Throw the latest US employment report on Friday into the mix and there’s scope for plenty of volatility for the FX majors. Locally, there’s only second-tier economic data in the beginning of the week but Thursday brings September’s Trade Balance (consensus +$1.2bn) and Friday sees Retail Sales (+0.4% m/m). The AUD traded very heavily last week, breaking its 200 day moving average at 0.7705 and falling on to a US 76 cent handle for the first time since July 13th. With the RBA silent ahead of next Tuesday’s Board meeting and domestic politics not helping, the path of least resistance still looks lower with Friday’s 0.7627 low being a key technical support level.

Key Movers

The New Zealand Dollar continues to see downside movements as broader US Dollar strength hampers the domestic currency. Opening yesterday morning at 0.6885, the release of trade balance figures was somewhat disappointing, with the deficit widening to $1143 million for the month of September. Once again the 0.69 handle could not be broken, with a decline to intraday lows overnight of 0.6835. With little domestic news on the horizon, political developments and new fiscal policy agenda items could have bearing on the direction the Kiwi. The New Zealand Dollar opens this morning at 0.6840. 

The Great British Pound is weaker today when valued against its US counterpart reaching an overnight low of 1.3147, pushing the pair off its weekly high of 1.3288. The UK macroeconomic calendar was very quiet yesterday with no scheduled data releases. The main focus last night was on the European Central Bank which slashed its stimulus programme in a major policy shift. Again today in the UK there are no scheduled data releases. The GBP/USD pair is currently trading at 1.3151. We now expect support to hold on moves approaching 1.3140 while any upward push will likely meet resistance around 1.3220.

The Euro sparked a heavy sell-off against the US Dollar overnight falling over 1.5% and through key resistance levels to a low of 1.1640. The move was on the back of the October ECB meeting where it was announced its asset purchase programme would be extended for a further nine months (until Sep 2018) at a reduced monthly pace of net purchases of EUR30bn with no other changes to interest rates or to forward guidance. Markets and investors were somewhat surprised with the announcement to be viewed as a dovish taper. On the data front, US weekly jobless claims increased less than expected with the data suggesting the labour market continues to tighten, the figure came in at 233k for the week ending Oct 21st. USD/JPY has pulled backed from three-month highs and currently changing hands just under the 114 handle. Looking ahead, markets will be awaiting USD GDP figures this evening which should support the case for a December rate hike from the Fed. 

Expected Ranges

  • NZD/USD: 0.6800 - 0.6900 ▼
  • GBP/AUD: 1.7100 - 1.7220 ▼