Commodity currencies spiral lower as speculation for rate cuts intensifies

United States Dollar:

The greenback strengthened yesterday, with cable falling back under 1.51 to a low of 1.5034. Better than expected US unemployment claims supported the move. The data showed that claims decreased by 43,000 from the previous week’s revised level. The dust is also settling following the FOMC statement earlier in the week and there’s perhaps a realisation that the Fed’s monetary policy and outlook seems to be ever diverging away from that of other major central banks – whether this continues is debatable, but we’ll go on the Fed’s latest statement here. Focus today will turn to US advance GDP. Economists expect the data to show that the US economy produced solid growth of 3% in the October-December quarter – another reason for investors to hit the dollar bids. There isn’t much by way of top tier data from the UK. In the meantime, GBP/USD has recovered off of its 24-hour lows to open this morning at 1.5075.

We expect a range today in the GBP/USD rate of 1.5030 to 1.5150.

Euro:

EUR/USD whipped around in the late afternoon session on Thursday and after pushing to a high of 1.1367 it then promptly lost almost 100 points in the space of a few hours, dropping to a low of 1.1278. There wasn’t anything majorly fundamental behind the move and it was more confined to intra-day traders keen to take profit after bidding the single currency higher throughout the day. Oddly, the weaker than expected German inflation numbers were shrugged off yesterday morning; confirmation of deflation within the eurozone really doesn’t come as much of a surprise to markets at the moment. European wide CPI flash estimate may get a different reaction today of course, but as we head in to next week the usual headlines are likely to continue dominating; Grexit and ECB QE.

We expect a range today in the GBP/EUR rate of 1.3320 to 1.3340.

Aussie and Kiwi Dollars:

The commodity currencies including AUD and NZD spiralled lower yesterday as speculation for an RBA rate cut at next Tuesday’s meeting intensified whilst the RBNZ’s dovish statement earlier in the week was still on people’s minds. A prominent Australian journalist with supposed close links to people at the RBA has said he’s ‘almost certain’ that the central bank would cut too. Markets are now close to pricing in a 70% chance of such an occurrence and so it wasn’t a surprise to see AUD/USD drop to a low of .7716 yesterday evening. NZD/USD shadowed the pair lower and fell to a low of .7230 but both have recovered a little to open this morning at .7775 and .7275 respectively.

We expect a range today in the GBP/AUD rate of 1.9290 to 1.9490.

We expect a range today in the GBP/NZD rate of 2.0610 to 2.0840.

Data releases for the next 24 hours:

AUD: No data

EUR: Spanish Flash CPI y/y, Spanish Flash GDP q/q, Italian Monthly Unemployment Rate, CPI Flash Estimate y/y, Unemployment Rate

GBP: Net Lending to Individuals m/m, M4 Money Supply m/m, Mortgage Approvals

NZD: No data

USD: Advance GDP q/q, Advance GDP Price Index q/q, Employment Cost Index q/q, Chicago PMI, Revised UoM Consumer Sentiment