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USD Index recoups losses

BY SHAMEEM MUSA

The Australian dollar edged lower into the weekly close sliding back below 0.77U.S cents despite wide spread USD weakness. The Greenback gave up losses against the Yen and a basket of major currency counterparts as investors question the likelihood of swift amendments to U.S tax reform and increased fiscal stimulus. The AUD has struggled to hold onto gains enjoyed above 0.7690/0.77 having found itself largely range bound between 0.7630 and 0.7730. Having failed to break resistance at 0.7730 the Aussie appears at the top of its recent rally, however should GDP swing higher there is scope for further upside. Despite a string of reasonable macroeconomic indicators the expected interest yield between Australia and the US remains largely unchanged with the RBA likely to maintain record low interest rates. Wednesday’s GDP print may be the catalyst needed to break the cycle of neutral monetary policy. A poor print will mark a 2nd consecutive quarterly decline and by technical definition push the economy into recession opening the door to a possible rate cut. Attentions today turn to the U.S docket for headline macroeconomic indicators.

The New Zealand dollar traded in a tight range last week testing resistance levels at 0.7240 on Friday evening. With little domestic news on Friday, markets were flat leading into the American session. U.S new home sales were softer and consumer sentiment dropped for the first time since Trumps election win. A busy week for economic data both domestically and offshore kick started by local Visitor arrival numbers and Trade balance figures on Tuesday. The Kiwi opens this morning at 0.72 against the US Dollar.

The Great British Pound opened this morning little changed when valued against its US Counterpart with the pair retreating from a weekly high of 1.2569. During Friday’s session BBA Mortgage Approvals surged to their highest in a year in January, up to 44.7K mortgages in January, and up from 43.6K in December. ON the local data front this week it begins with Wednesday’s Manufacturing PMI for the month of February with markets forecasting a reading of 55.5. Mortgage Approvals will also be released on Wednesday for the month of February. Rounding off the week Construction PMI on Thursday is forecast at 52.4. Services PMI on Friday is forecast at 54.2. The GBP/USD pair is currently trading at 1.2457. We now expect support to hold on moves approaching 1.2430 while any upward push will likely meet resistance around 1.2485.

Still playing on the back of investor minds last week were the minutes of the Federal Reserve which have dampening demand for the world’s largest reserve currency, they revealed the Feds uncertainty with Trump’s economic agenda. USD/JPY closed the week down at 112.14, having reached 113.77 earlier in the week. Through mixed bag of economic data out of the US the Euro initially gained touching levels of 1.0618 before falling back into negative territory. U.S New Home Sales rose by 3.7% which came in under expectations of 6.3% and in a separate report the University of Michigan confirmed the Consumer Sentiment Index hit 96.3 this month, slightly above expectations. Support for the EUR/USD sits at 1.0520, any moves held above 1.0600 could favour a recovery in the pair.