IMF increases global growth forecast


Australian Dollar:

The Aussie dollar was fairly quiet during a relatively uneventful Asian session on Tuesday. The dollar began the day the same as Monday slowly drifting up against its US counterpart. After strong data out of New Zealand in the morning the Aussie had its biggest move for the session spiking 20 points to 0.8822 though quickly retraced most of the gains. The Aussie continued to creep higher throughout the day reaching highs of 0.8839. Overnight we saw the higher yielding currency drop off against the Greenback as the IMF revised economic growth forecasts. However the Australian dollar still managed to open slightly higher against the US at 0.8812. Today we finally have data out domestically and investors will be watching the Westpac Consumer Sentiment and CPI this morning closely for direction.
  • We expect a range today of 0.8775 – 0.8840

New Zealand Dollar:

The New Zealand dollar was one of the major gainers against the Greenback yesterday on the back of some strong data out locally. The Kiwi began the morning at 0.8261 and began to slowly drift upwards similar to most majors against the US. Statistics New Zealand released a positive consumer’s price index in the morning and this lead to a spike in the Kiwi by 80 points to 0.8340 against the Greenback. The Kiwi similarly bounced upwards against the British Pound by just over 75 points. The CPI came in at 0.1 per cent for the December quarter against a forecast for no change and a previous quarter of 0.9 per cent. The data was made up by higher international air fares and house prices while being offset by lower vegetable costs and discounted petrol. Many investors had already speculated the Reserve Bank of New Zealand was looking to lift the cash rate in the early months of 2014 and this figure is believed to keep with these views. The Kiwi finished off the Asian session dropping off from highs of 0.8344 and overnight we saw the New Zealand dollar consolidate to open this morning stronger than yesterday at 0.8320. There is no data out domestically today however Tuesday will be the first day of data for Australia in the week and investors will look across for direction.
  • We expect a range today of 0.8285 – 0.8365

Great British Pound:

The British Pound broke the trend of the other majors and lost ground against the Greenback during the Asian session. Down 40 points from the open at its lowest, the Sterling did recover to 1.6430 as the session passed. The British Pound also struggled against the higher yielding currencies in the day touching lows of 1.8590 against the Aussie and 1.9688 against the Kiwi. Overnight British factory orders came in down for January but the British Pound’s losses were limited as new manufacturing orders were the highest in nearly 3 years. The UK’s growth forecast was upgraded by the IMF overnight the largest of any country to 2.4 per cent from 1.9 per cent. The IMF subsequently was positive about the global economy saying expansion would take place at 3.6 per cent. This helped the Sterling gain further ground opening today at 1.6475 against the US. Tuesday is a full day of data out of the UK with most investors keeping their eyes on the GBP unemployment rate being released later tonight. Today we see the Sterling open at stronger against the Aussie at 1.8693 and weaker against the Kiwi at 1.9802.
  • We expect a range today of 1.8635 – 1.8750

Majors:

Most of the major currencies drifted higher against the US on Tuesday as the beginning of the session was fairly quiet. This was partially due to the end of a public holiday in the US and a limited release of data worldwide. The Euro drifted within a tight range through the Asian session touching lows of 1.3538 and highs of 1.3557. Overnight the US gained slightly on the Euro as the IMF increased the global growth forecast for 2014. The growth forecast was lifted from 3.6 per cent to 3.7 per cent giving more credibility to investor expectations that the scaling back of central bank’s stimulus packages is nearing. The US economy also had their economic expansion lifted from 2.6 per cent to 2.8 per cent. Profit takers quickly wiped out the gains made by the US dollar and the Euro opens higher today at 1.3551 against the Greenback. With another day of limited data out worldwide investors will have their eyes on the UK for direction.

Data releases:

  • AUD: Westpac Consumer Sentiment, CPI q/q
  • NZD: No Data
  • JPY: Monetary Policy Statement, All Industries Activity, BOJ Press Conference 
  • GBP: Claimant Count Change, MPC Asset Purchase Facility Votes, MPC Official Bank Rate Votes, Unemployment Rate, Average Earnings Index 3m/y, Public Sector Net Borrowing
  • EUR: No Data
  • USD: No Data

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