Aussie tumbles on RBA comments

Australian Dollar:

The Australian dollar got off to a slow start on Friday trading within a tight range. The Aussie opened the day at 0.8761 drifting 11 points lower to 0.8750. As the session continued the Aussie drifted back to its open price ahead of the long weekend. However late in the afternoon headlines surprised causing the Aussie to tumble, reaching lows of 0.8661 against the US. An announcement from RBA board member Rider talking the currency lower “I think it hasn’t fallen far enough” stating that 80 cents would be a fair value was released. These comments along with a recent run of poor data out of China, Australia’s largest trading partner sent the Aussie into a spiral downwards. The article was published disclosing, China has been said to have issued an alert on credit risks in the coal industry. Overnight the Aussie managed to consolidate opening substantially lower today at 0.8699 against the Greenback. With the long weekend in Australia due to Australia day investors will be focused on the New Home sales out of the US for guidance tonight and the US Fed’s decision on tapering later this week. 

• We expect a range today of 0.8645 – 0.8755

New Zealand Dollar:

In a lightly traded Asian session the NZ dollar was one of the bigger movers of the major currencies. The higher yielding currency came off against the US in the early part of the session dropping to 0.8271, 27 points from the open. Credit card spending was the only local data released today for the Kiwi and came in at 4.7 per cent, lower than previous figures of 6.9 per cent. This was a 1.2 per cent fall, however for the year credit card spending increased 4.7 per cent. Late in the Asian session the NZ dollar sharply declined moving just under 80 points from the daily open to 0.8220. This was on the back of more negative news out of China as traders continued to be concerned over soft Chinese manufacturing figures. Overnight the NZ dollar stayed close to these lows opening this morning weaker against the US at 0.8235. Eyes this week will be focused on the NZ Reserve bank to see whether an increase in interest rates is on the cards.

• We expect a range today of 0.8185 – 0.8280

Great British Pound:

After a big previous night of gains against the US dollar the British Pound consolidated to open at 1.6625 on Friday. Throughout the morning of the Asian session the GBP traded within a 15 point variance against the US. The Sterling did however move in a bigger range against the higher yielding currencies drifting lower against the Aussie hitting lows of 1.8918. Conversely later in the session after comments from RBA board member Rider and negativity out of China the GBP managed to gain to reach highs of 1.9181. Against the Kiwi the Sterling also jumped reaching tops of 2.0212. Overnight local data out of the UK was weaker than expected after the British Bankers Association said that mortgage approvals rose less than expected to 46,500 versus a forecast of 47,200. These weak figures lead to the GBP falling against its US counterpart hitting lows of 1.6479 opening today weaker against the US at 1.6484. Similarly the Sterling came off opening softer against the Aussie and Kiwi currently sitting at 1.8949 and 2.0017 respectively.

• We expect a range today of 1.8885 – 1.9015

Majors:

As expected the Euro experienced another quiet Asian session barely moving off the 1.6625 opening levels against the Greenback. Investors were eagerly awaiting a heavy data session to take place overnight. During the night the Euro was supported by comments from the ECB President Draghi in which he stated that he believes risks are down and a recovery in the Eurozone is in sight. This is one of the first times in a longer period that positivity has been seen to emanate from the ECB president. The Euro hit highs of 1.3732 against the Greenback but eventually consolidated lower opening weaker against its US counterpart at 1.3675.

This week investors will be watching the US closely as the Federal Reserve will be making a decision on whether to cut another 10Billion US dollars from their 75 Billion US monthly asset purchase program. The Federal Open Market Committee will be meeting on the 28th and 29th of January.

Data releases:

• AUD: Bank Holiday
• NZD: No Data
• JPY: Monetary Policy Meeting Minutes, Trade Balance
• GBP: Nationwide HPI m/m
• EUR: German Retail Sales m/m, German Ifo Business Climate, Eurogroup Meetings, German Buba Monthly Report and Buba President Weidmann Speaks
• USD: Flash Services PMI, New Home Sales