Aussie surges on strong CPI figures

Australian Dollar:

The Aussie opened relatively flat against the US on Wednesday with little movement throughout the morning as investors waited on domestic figure releases for guidance. First up the Consumer Sentiment came in at -1.7 per cent for January against a previous release of -4.8 per cent and the Aussie edged very slightly down to lows of 0.8789. All five components fell in January however the index level at this current point is still in a relaxed position. Investors were holding off on their moves until the anticipated CPI figures were released an hour later. The CPI figures were better than expected and the Aussie jumped 71 points to 0.8860. The CPI actual was at 0.8 per cent which was 0.3 per cent ahead of forecast. The large spike in the Aussie is the result of the strong CPI figures which reduce the likelihood of an RBA rate cut in February. The Aussie dollar finished the Asian session 30 points off the highs at 88.56. Overnight the Aussie consolidated slightly downwards against the US and opens this morning stronger than yesterday at 0.8854. With a full day of US and European data investors will likely be looking to the overnight session for direction.

• We expect a range today of 0.8805 – 0.8905

New Zealand Dollar:

The New Zealand dollar has had an up and down Asian session as it moved within a 118 point range on Wednesday against the Greenback. The Kiwi started the day at 0.8320 before slowly drifting downwards against the US backed by expectations the US Federal Reserve will begin to continue tapering its stimulus. After the CPI figures were unexpectedly positive out of Australia the NZ dollar jumped 17 points to session highs of 0.8324 against the US. The Kiwi contrastingly tumbled against its cross-Tasman counterpart falling 60 points to lows of 0.9377 after the data release. With the absence of figures locally, investors waited on offshore figures overnight and the NZD retracted its gains to below the session open to hit lows of 0.8306. Overnight the NZ dollar made a new high for the day of 0.8345 before retracing and touching lows of 0.8296 against the US. This morning the NZ dollar opens 11 points off its lows at 0.8307. Investors today will keep an eye on the Business Manufacturing Index being released locally for the Kiwi.

• We expect a range today of 0.8255 – 0.8345

Great British Pound:

The British Pound traded in a tight 19 point range against the US dollar during the Morning session on Wednesday moving between a high of 1.6489 and a low of 1.6470. However the Sterling did move against the higher yielding currencies. The GBP fell 90 points on CPI figures out of Australia against the Aussie to 1.8620 and 35 points against the Kiwi to 1.9796. Later in the session the British Pound remained weaker against the Aussie sitting just below the 1.8600 levels however it did gain some ground back against the NZ dollar to 1.9811. Investors waited patiently for the heavy data releases overnight and the data did not disappoint. The British Pound jumped to 3 week highs against the US as unemployment figures dropped to 7.1 per cent for November putting further pressure on the Bank of England to increase the interest rates. The Bank of England has previously stated the 7 per cent mark for unemployment is where they will start to consider the rate increases. The British Pound subsequently opens stronger against the Greenback only 13 points off the daily high at 1.6578. The Sterling similarly gained against the higher yielding currencies sitting at 1.8722 against the AUD and 1.9948 against the NZD. Thursday is another jam packed day of data out of the US, UK and Europe and investors will watch the figures cautiously to see if they can gauge direction. 

• We expect a range today of 1.8685 – 1.8775 

Majors:

As expected with not much data out during the Asian session the Euro traded in a tight 16 point range against the US dollar. Opening the day at 1.3551 the Euro drifted up against the US to touch highs of 1.3571 and lows of 1.3555, finishing in the middle at 1.3561. Overnight the Euro made a new high of 1.3579 before drifting downwards as it reached lows of 1.3533. Both the Euro and the Greenback are receiving strong backing from the IMF’s increased growth forecast however it does seem that most investors are waiting cautiously on the sidelines. Investors are focused on next week’s US Federal Reserve decision on interest rates, which will give clarity over whether there will be any changes to their stimulus program. The Euro opens 3 points weaker than yesterday at 1.3548.

All eyes today will be on the first release of data out of the US for the week with unemployment claims and existing home sales to be the headline. Again plenty of data out of the UK and Europe with eyes being focused on German Flash manufacturing overnight. 

Data releases:

• AUD: MI Inflation Expectations
• NZD: Business NZ Manufacturing Index
• JPY: BOJ Monthly Report
• GBP: MPC Member McCafferty and Fisher Speaks, 10-y Bond Auction, CBI realized sales
• EUR: French Flash Manufacturing PMI, French Flash Services PMI, Spanish Unemployment Rate, German Constitutional Court Ruling, German Flash Manufacturing PMI, German Flash Services PMI, Current Account, Flash Manufacturing PMI, Flash Services PMI, Spanish HPI q/q
• USD: Unemployment Claims, Flash Manufacturing PMI, HPI m/m, Existing Home Sales, CB leading Index m/m, Natural Gas Storage, Crude Oil Inventories