U.S. Dollar higher in anticipation for Fed Meeting
Tuesday 19 September, 2017
Daily Currency Update
Key MoversThe Australian Dollar fell 40 basis points during the American session to post a fresh 2-week low. During the Asian session, the pair tested the 0.8030 resistance level before ultimately turning to the downside. Opening this morning at 0.7960, the Aussie was hit on multiple fronts with mixed Chinese money data weighing on the Australian Dollar. The bearish outlook was further exacerbated by the sharp decline in the Canadian dollar, triggering a further sell-off in both commodity currencies. With the ‘Quantitative Tightening’ announcement widely expected to be released this Thursday, policy makers and indeed traders are positioning themselves for a world with higher borrowing costs, strengthening the outlook of the Greenback and in turn weighing on its counterpart the Aussie. With a quiet day on the domestic economic calendar, investors are treading water ahead of an action-packed Thursday.
The New Zealand dollar is weaker this morning when valued against the Greenback. The Kiwi reached an overnight high of 0.7343 before falling 0.5% for the day to 0.7250, almost a full cent off its high. The USD strength came as the market now expects the Federal Reserve to announce on Thursday the beginning of “quantitative tightening”, with its balance sheet expected to begin shrinking from next month, as the Federal Reserve keeps its options open for a possible interest rate hike later this year in December. Westpac Consumer Sentiment was released this morning which softened to a level of 112.4 in September, down from 113.4 last quarter. The NZD/USD pair is currently trading at 0.7259. We now expect support to hold on moves approaching 0.7240 while any upward push will likely meet resistance around 0.7329.
The Great British Pound broke lower through trade on Monday, ending a multi-day rally that saw Sterling touch 15 month highs. Sterling slumped back below 1.36 after BoE Governor Mark Carney suggested Monetary Policy adjustments would be limited and gradual. The commentary failed to meet the hawkish expectations of some investors and worried those backing a November rate hike. Falling across the board the GBP touched intraday lows at 1.3466 and open this morning at 1.3494 as attentions turn to Wednesday’s retails sales print and FOMC policy meeting for wider direction moving forward.
The U.S. Dollar was marginally higher in the lead up to the latest Federal Reserve rate decision on Thursday. The U.S Dollar index (DXY) is currently trading at 92.04 at the time of writing and up 0.2% for the day as markets prepare for the possibility that Fed. Reserve Governor Janet Yellen will announce the scale back of its current balance sheet which sits at $US4.4 Trillion Dollars. European CPI figures came in at expectations of 1.5% on an annual basis with the EUR/USD steady at 1.1950. The Greenback rose to a seven week high of 111.66 against the Yen yesterday as Japan observed a public holiday and investors positions themselves for the latest central bank meeting. The CME Fedwatch tool is currently pricing a 62% probability of a further interest rate rise by the Fed reserve by the end of 2017.
- AUD/USD: 0.7900 - 0.8000 ▼
- NZD/USD: 0.7200 - 0.7300 ▼
- GBP/AUD: 1.6900 - 1.7100 ▲