AUD rallies on back of stronger business confidence

Australian Dollar:

The Australian dollar surged higher throughout local trade jumping some 60 points and breaching 0.90 for the first time since January 14th. The domestic unit was buoyed by stronger than expected housing data, which saw prices surge 9.3% in quarter four of 2013, and a NAB market confidence report suggesting business conditions in January had improved for the first time in four months. The upward shift was supported by reduced market liquidity as Japanese traders enjoyed National Foundation Day and a squaring of USD positions as investors looked for further clarification on future possible reductions in bond purchases when Federal Reserve Chairwoman Janet Yellen testified in front of the Financial Services Committee. Yellen maintained her dovish stance confirming that the Fed’s asset purchase reduction schedule is not on a pre-set course and the recovery in labour markets is far from complete. The comments while largely expected weighed down the Greenback against high yielding assets and the AUD reached an overnight high of 0.9048 before opening a full cent higher this morning at 0.9040. Attention now shifts to Westpac consumer sentiment and a Chinese Trade Balance reading for further direction.

• We expect a range today of 0.8950 - 0.9080

New Zealand Dollar:

The New Zealand dollar appreciated throughout trade on Tuesday. With little in the way of domestic data to ruffle investor feathers the Kiwi followed its antipodean counterpart higher as fears surrounding emerging market instability subsided and US Federal Reserve Chairwoman’s address to the Financial Services committee offered few surprises. The NZD moved back through 0.83 in overnight trade as risk appetite returned while NZD/JPY was the day’s biggest mover as the cross currency pair touched two week highs with investors selling the safe haven asset in favour of a higher yield. There is again little driving the domestic calendar so market attentions will now turn to Chinese Trade Balance numbers for further direction today.

• We expect a range today of 0.8260 – 0.8380.

Great British Pound:

The Great British Pound appreciated against a basket of major trading partners yesterday as industry reports exhibited accelerated retail sales numbers for January. The 3.9% jump in sales served as a timely reminder that the UK economic recovery is still gathering pace and pushed the Cable back through 1.64 before reaching an overnight high at 1.6488. Attention now turns to today’s all-important Bank of England Inflation Report and BoE Governor Mark Carneys accompanying statement for further direction. Sterling opens this morning lower against both the AUD and NZD swapping hands at 1.8195 and 1.9757 respectively.

• We expect a range today of 1.8140 – 1.8250.

Majors:

A mixed session for the U.S Dollar as markets absorbed and responded to testimony of Federal Reserve President Janet Yellen as the chairwoman addressed the Federal Services Committee. The overall all address offered little surprises as Yellen preserved the status quo maintaining her dovish stance. The Central Bank head suggested the recovery in labour markets was far from complete, somewhat adding pressure to a dollar already weight down by stimulus, but reiterated the Fed was committed and on track to keep reducing current stimulus measures. After poor jobs number in both December and January the remarks went along way to dispelling fears the economic recovery was not where we expected.  With little else in the way of headline data the Greenback managed to trim some of the week’s earlier Euro losses while gaining against the Japanese Yen as the focus now turns to ECB President Mario Draghi and his speech this evening before US retail sales and unemployment claims Friday .   

Data releases

• AUD: Westpac Consumer Sentiment.
• NZD: No Data.
• JPY: Core Machinery Orders m/m, Tertiary Industry Activity m/m, M2 Money Stock and Prelim Machine Tool Orders.
• GBP: BoE Governor Carney Speaks, BoE inflation Report and CB leading Index m/m.
• EUR: Eurozone Industrial Production m/m and ECB President Mario Draghi Speaks.
• USD: Mortgage Delinquencies, Crude Oil Inventories, 10y Bond Auction and Federal Budget Balance.