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Kiwi hits one-month high ahead of US data

By OFX

The New Zealand Dollar hit a 1 month high of 0.69347 against the United States Dollar earlier this morning, building on it’s momentum that was fuelled by the dovish U.S. Federal Reserve. This increase can also be owing to a weaker USD, as the US data release of employment cost index coming in lower than their forecasted rated. Additionally, consumer inflation releases last week came in better than expected reducing the chances of a rate cut later this year.

The NZD can extend it’s drive with the United States unemployment rate data released later tonight. A figure below it’s forecasted rate of 3.9% will help boost the NZD further. In terms of NZD macroeconomic news, there is little deemed to affect the NZD until the employment change and unemployment rate data release next week by Statistics New Zealand. Expected to have a major impact on the Kiwi, these releases show the changes in number of employed people and percentage of work force that is unemployed.

The Australian dollar held on to gains won in the aftermath of the Federal Reserve’s policy statement and better than anticipated Chinese Manufacturing Data. Having broken above resistance at 0.7230 the AUD continued its upward push touching 0.7295 and testing a break above 0.7300 after Chinese manufacturing PMI showed a marginal uptick in January. Despite printing below the line of delineation between growth and contraction manufacturing in China showed improvements on Decembers soft read, bouncing of 20-month lows.

Having consolidated moves above recent resistance handles the AUD is poised to extend short term upside. The sell off in the USD could be compounded it tonight’s payroll print fails to meet market expectations. A soft read will underpin the recent shift in Fed and FOMC rhetoric, prompting a deeper correction for the worlds base currency. The recent government shutdown is expected to weigh on employment data and could have a wide-reaching impact on GDP that is simply never recovered

With little of note on the domestic docket today attentions turn to US/China trade talks. Optimism continues to improve on headline news as Vice Premier Liu reported hopes of accelerating the 90-day tariff truce, hinting a trade deal could be completed sooner. As we move into the weekend we are looking for a consolidation of the recent upside and a close above 0.7250 as a possible affirmation of an extended short term upturn.

The Great British Pound is slightly weaker this morning when valued against the Greenback. The GBP/USD pair reached an overnight high of 1.3159 before settling around 1.3100. For the month, the Sterling is up nearly 3 percent against the greenback, its biggest monthly rise since January 2018. However given the Brexit uncertainty any upside remains well limited.

On the release front today we will see the UK January Markit Manufacturing PMI is expected to come at 53.5 vs. 54.2 previously, adding to Sterling negative tone.

From a technical perspective, the GBP/USD pair is currently trading at 1.3106. We continue to expect support to hold on moves approaching 1.3050 while now any upward push will likely meet resistance around 1.3150.

The United States Dollar continued its move lower overnight, hitting a four-month low to open this morning at 95.57 on the US Dollar Index. Global foreign exchange markets roiled after the Federal Reserves statement was released with the after-effects still overshadowing market movements well into Friday. There was some news to digest however with wage growth data suggesting private wages increased by 3.1% over the past year. Chicago PMI fell sharply in January to be more in line with the ISM manufacturing survey and weekly jobless claims spiked. Nevertheless, the story of the day remained the Federal Reserves’ neutral stance with markets continuing to price in the policy adjustment.

Moving into Friday, the Greenback has more data to look forward to with non-farm payroll and another ISM manufacturing survey due for release.

Euro gains on Thursday was quickly erased overnight after failing to consolidate above the 1.15 handle after reaching a high of 1.1514. The correction came in offshore trading as the EUR/USD came under selling pressure following poor Italian GDP figures, sliding further into negative territory. There was no change for preliminary European GDP figures for the 4th quarter of 2018 as growth remained disappointing at 0.2% and 1.8% for the year.

Unemployment in the EU zone was steady at 7.9% in December which remains the lowest rate recorded in the Euro area since October 2008, and down from 8.6% in December 2017.

The EUR/USD settled eventually this morning around 1.1450 as movements will continue to be driven by American economic data to end the week. This evening sees the release of Non-Farm employment change with core inflation estimates out of the EU region.

The EUR/USD opens this morning at 1.1445.

The Canadian dollar held onto recent gains, rebuffing moves back toward 0.76 and touching intraday highs at 0.7621. Having rallied in the aftermath of the Fed’s policy statement the CAD took advantage of recent USD softness, pushing through resistance to extend what has become a month-long upturn. The Loonie ended the month as the top G10 performer when valued against the worlds base currency. Buoyed by an improved demand for risk, shifting US central bank policy and a rebound in oil prices.

Having pushed through resistance at 0.76 (1.3158) the CAD is poised to extend upside moves on softening US expectations. However, investors appear reticent when significantly extending upside gains as the risk rally is seemingly running out of steam and global growth concerns weigh on investors appetite to gamble.

With little of note on the domestic docket today attentions turn to a slew of US data sets, headlined by employment data. Softness across key macroeconomic indicators will only underpin the Fed’ shifting stance and compound the recent greenback slide.