Investors seek higher yield as US rate expectations pushed out

Australian Dollar:

The Australian Dollar gained against its US counterpart throughout trade on Monday edging toward 0.88 as investors looked to higher yielding assets in the wake of an outward revision in the timing of Fed Rate hikes. FOMC member and Dallas Fed President Richard Fisher dampened expectations further as he suggested he would maintain his “Hawkish” stance on rates but wanted “to be sensible” in light of current global growth prospects. With estimates of a Fed Rate hike as early as October 2015 now falling below 50% investors are again turning to the AUD as a viable carry trade option and we may be entering a new period of consolidation between 0.86 and 0.89. Attentions today turn to The RBA’s October Monetary Policy Meeting minutes and Chinese GDP reports for directional impetus.

• We expect a range today between 0.8700 – 0.8850

New Zealand Dollar:

Much likes its antipodean and Trans-Tasman counterpart the New Zealand Dollar was the primary benefactor of revised US rate expectations and a shift toward higher yields throughout trade on Monday. Touching intraday highs of 0.7980 the Kiwi is struggling to break key resistance levels at 0.8000 and opens this morning at 0.7968. With little macro-economic data available on the domestic docket market focus will turn to the 3rd quarter Chinese GDP reports as the primary directional driver leading into Wednesday US inflation numbers and Thursday’s local CPI reading.

• We expect a range today of 0.7850 – 0.8050

Great British Pound:

Sterling continued its upward revision through trade on Monday breaking through 1.6150 for the first time since October ninth. With expectations the US Federal Reserve will maintain its accommodating monetary policy stance well into 2015 Cable has rallied strongly advancing some 2 cents in the last 7 days. With little on the economic calendar today market focus will be directed toward the MPC October Minutes tomorrow for direction and guidance on Bank of England interest rate policies.

• We expect a range today between 1.8350 – 1.8500

Majors:

In the absence of any headline macro-economic data events major currency units maintained a relatively tight range throughout trade on Monday. The Greenback was forced marginally lower against higher yielding assets as expectations surrounding the timing of Federal Reserve rate hikes are revised outward. Expectations that the world’s largest central bank will raise interest rates in October 2015 have now fallen below 50% a dramatic reversal given 52% of futures traders estimated an adjustment in July as recently as October 3rd. The shift in Interest rate expectations comes on the back of a slowdown in global growth prospects and a dovish shift in Fed policy.

After a volatile week it seems markets have slipped into a quieter start to this trading week ahead of US inflation data and European Manufacturing numbers due Wednesday and Thursday. Markets will be seeking any signs of growth within the Eurozone after the European Central Bank announced it will now be covering bonds in a bid to keep deflation at bay as the German economy approaches recession with little to no growth forecast for the 3rd and 4th quarters of 2014. Attentions today turn to Chinese GDP reports with markets looking for any hint the world’s second largest economy can maintain current growth levels.

Data releases

• AUD: RBA Monetary Policy Meeting Minutes and RBA Deputy Governor Lowe Speaks
• NZD: Credit Card Spending
• JPY: All Industries Activity
• GBP: Public Sector Net Borrowing, 10 Year Bond Auction
• EUR: No Data
• USD: Existing Home Sales