Aussie tumbles on RBA comments

Australian Dollar:

Thursday presented another day of volatility in a week that has seen the Australian dollar trade in a reasonably wide range. The AUD opened Thursday at 0.9436 after a previous night of losses against the Greenback as investors waited on Chinese and domestic data to give direction in early trade. The Chinese Non-Manufacturing figures were expansionary however looked to be shrugged aside as Reserve Bank Governor Glenn Stevens talked the Aussie dollar lower. Stevens stated the Australian dollar is overvalued by more than a few cents whilst investors continue to underestimate the risks associated with a large depreciation of the dollar. In an abrupt move yesterday the Aussie lost over half a cent versus the USD to touch lows of 0.9375. Mixed results were released soon after as building approvals surprised whilst retail sales disappointed, nonetheless the higher yielding currency remained steady after its steep earlier fall. Overnight the Aussie continued to tumble on strong US figures touching lows of 0.9327 opening today weaker at 0.9348. Heading into the weekend investors will expect a much quieter Friday as there is a holiday in the US.

We expect a range today of 0.9305 – 0.9390

New Zealand Dollar:

The New Zealand dollar spent Thursday trading in another tight range in a market with limited data to provide direction. There were no domestic numbers for the Kiwi out as Chinese Non-Manufacturing PMI figures took centre stage. The index was announced with a fall from the previous month and the NZ dollar had its biggest move for the day dropping to session lows of 0.8749. The higher yielding currency managed to recover soon after as the figures were still expansionary over the 50.0 threshold. Overnight the US printed strong economic numbers and the NZ dollar dived to touch lows of 0.8715. The Kiwi has managed to slightly recover since however opens weaker at 0.8750 this morning. As investors look to the weekend, markets are expected to be fairly subdued due to Independence Day in the US and another session without data in New Zealand.

We expect a range today of 0.8705 – 0.8795

Great British Pound:

The British Pound lost ground against the US dollar on Thursday as an array of poor data was released from the UK. The Services PMI numbers were shown to have decreased to 57.5 in the month of June whereas May was 58.6. These numbers were also below forecast by 0.9 however since the data is still above 50 the industry is still expansionary. The major losses for the Sterling occurred during US trade where the Greenback strengthened across the board as investors witnessed pressure on the Pound. The British Pound fell to lows of 1.7112 however did manage to claw its way back to open marginally weaker at 1.7150 against the Greenback. The GBP did however manage to take advantage of a weak Asian trade in relation to the Aussie and Kiwi. The Sterling gained against the higher yielding currencies lifting nearly a cent and a half against the AUD to 1.8350 and slightly against the Kiwi to 1.9603. Although the economic figures printed were not as positive as expected the UK economy is still performing and investors are under the impression a rise in interest rates may occur sooner than initially thought.

We expect a range today of 1.8290 – 1.8410

Majors:

In what was billed to be the economic highlight of the week the economic data releases from the US did not disappoint. The Greenback strengthened across the board after investors witnessed the US economy adding a significant amount of employees to the workforce. The non-farm payrolls showed an increase of 288,000 whilst forecast was only for 214,000. The number of individuals who claimed unemployment benefits in the US was steady whilst the Unemployment rate dropped from 6.3 per cent to 6.1 per cent. These numbers have kept anticipation for the US federal reserve to keep the tapering of the stimulus program in line with what has been planned, paving the way for an interest rate rise some time in 2015.

In the Eurozone investors witnessed rates being put on hold after they were lowered to record numbers last month. ECB president Draghi mentioned the unemployment rate was much too high and cautioned saying there risks with a bias to the downside. Draghi also mentioned that the ECB will be looking to use approaches outside the norm to combat extended periods of very low inflation. The Euro opens today at 1.3606 versus the Greenback half a cent down from Thursday.