Tumbling Oil prices dampen risk appetite and global growth expectations

Australian Dollar:

The Australian dollar opens the week buying just 0.8232 U.S cents after U.S Consumer Sentiment surged to new highs while Chinese Industrial Production fell more than analysts anticipated. With little local data available to steer direction the Aussie traded sideways for much of the domestic session before moving sharply lower when Chinese data saw Industrial Production fall 0.5% to 7.2%. Bouncing back above 0.8250 the AUD struggled to maintain any meaningful rally in the face of soft but stable US PPI and stronger than anticipated Consumer Sentiment. Adding insult to injury a general depreciation in risk appetite has sapped any strength from upward rallies as declining oil prices increase concerns global growth is faltering. Focus shifts to Mid Financial Year Economic and Fiscal Outlook ahead of tomorrow’s RBA policy meeting minutes. With the recent jawboning coming from Glenn Stevens and Deputy Lowe we expect the minutes to take on a more dovish tone than those released November.

• We expect a range today between 0.8180 – 0.8380

New Zealand Dollar:

The New Zealand dollar struggled Friday moving lower in the face of depreciating oil prices. Dipping back below 0.78 U.S cents the Kiwi fell victim to a wide spread shift in risk sentiment amid concerns global growth is stagnating. With domestic Macro-Economic drivers available to steer direction through trade on Monday we expect a relatively stable start to the week ahead of key 3rd quarter GDP Thursday and Global Dairy Trade Price Index Wednesday.

• We expect a range today of 0.7680 – 0.7880

Great British Pound:

Sterling offered little to excite markets and investors on Friday holding onto its weekly advance and a tight trading range bouncing between 1.57 and 1.5738. With little domestic data to govern direction the Great British Pound was left to offshore vices to guide it through to the end of the trading week. A general decline in risk appetite offset any Greenback rally stemming from stronger consumer sentiment and we open this morning buying 1.5725. Attentions turn to a busy week ahead with a Bank stress test, CPI report and speech from BoE Governor Carney Tuesday the key directional drivers kick starting the week.  

• We expect a range today between 1.8910 – 1.9290

Majors:

The US Dollars seven week advance ended as investors looked to the safe haven Japanese Yen in the face of falling oil prices and overall concerns surrounding deteriorating global growth prospects. The tumbling price of crude oil has put a drag on inflationary expectations and gives the Fed reason to hold off on raising interest rates. With the world’s largest central bank set to commence its final 2 day meeting this year on Wednesday markets will be keenly focused on the rhetoric emerging from the FOMC press conference and rate statement seeking any hint or guidance as to when we can expect a tightening in monetary policy. In other news Japanese Prime Minister Shinzo Abe’s coalition has cruised to victory securing a comfortable election win yesterday. While widely expected the result gives Abe the support needed to continue the implementation of his “three arrows” strategy of monetary policy easing, increased government spending and economic reform in a bid to stimulate growth amid an economy struggling to drive out of recession. The win is likely to heap further pressure on an embattled Japanese Yen. Today attentions turn to the Tankan report for an insight into Japanese business conditions while Industrial Production and Manufacturing data will drive Greenback direction ahead of the Fed policy meeting later this week.

Data releases

• AUD: New Motor Vehicle Sales m/m and Mid Financial Year Economic and Fiscal Outlook
• NZD: No Data
• JPY: Tankan Manufacturing Index and Tankan Non-Manufacturing Index             
• GBP: Rightmove HPI and CB Industrial Order Expectations
• EUR: German Buba Monthly Report
• USD: Empire State Manufacturing Index, Capacity Utilisation Rate, Industrial Production and NAHB Mousing Market Index.