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US labour market report, key driver

MICHAEL JUDGE

The Australian dollar moved higher through trade on Thursday supported by a stable labour market report and wider USD positioning. Despite a marginal uptick in the unemployment rate labour data remained steady with some 13,000 new jobs added to the economy throughout December. After two strong months yesterday data was seen as steadying influence and suggests the economy is reasonably healthy with some slack in employment to be absorbed. Having maintained a relatively tight trading range through much of the domestic session the Aussie found support in overnight trade moving through 0.7550 and touching session highs at 0.7573. Markets appear nervous in extending USD gains ahead of today’s presidential inauguration with direction hanging on a clear policy outline from the soon to be incumbent Trump. 

The New Zealand dollar opens this morning little changed when valued against its US Counterpart at a rate of 0.7186. Having traded to an overnight high of 0.7200 the past 24 hours has been a largely uninspiring trading window for the Kiwi with investors already sitting on their hands ahead of this evening’s US President Inauguration. We now expect support to hold on moves approaching 0.7107 while any upward push will likely meet resistance around 0.7254. With no local data scheduled today, traders will again be looking for offshore direction for the kiwi.

The Great British Pound edged higher through trade on Thursday advancing six tenths of a percent and moving back through 1.23. Cable touched intraday highs at 1.2341 as investors continued to extend recent gains and recoup losses suffered through last week. Sterling has rallied strongly in the wake of Prime Minster May’s Brexit address on Tuesday buoyed by the provision of a clear policy plan and path to European exit. In stark contrast investors remain wary President elect Donald Trump will fail to deliver on Fiscal stimulus, tax reform and deregulation with all eye shifting to today’s Inauguration and a critical address. Failure to deliver a concise policy outline could force a deeper USD correction and renewed Cable upside. 

The U.S dollar climbed marginally higher through trade on Thursday bolstered an extended string of upbeat macroeconomic data, comments from Fed Chari Janet Yellen and a somewhat dovish ECB. The USD forced the Euro back through 1.06 after ECB President Mario Draghi suggested an extended period of monetary stimulus was appropriate. Speaking in a press conference following the banks first meeting of 2017 Draghi noted that despite a jump in German inflation wider price pressures remained soft prompting the bank to maintain its negative interest rate policy. The USD advanced almost 1 percent as investors compared Draghi’s rhetoric with earlier comments proffered by Fed Chair Janet Yellen, noting the clear disparity in policy paths. Having advanced to touch session highs at 1.0593 while moving through 115.50 JPY the Dollar reversed gains as investors looked to square positions leading into Friday’s critical risk event and Trump’s inauguration. Markets optimism lingers ahead of Trump’s inauguration address however there is certainly a nervousness that the President elect will not deliver on fiscal stimulus, deregulation and tax reform. Failure to deliver a clear policy message today will likely induce further downside pressures on the world’s base currency with inactivity within the first 100 days may see market digest and reverse recent gains.