Tapering continues as USD strengthens

Australian Dollar:

The Australian dollar began Wednesday bolstered by easing tensions out of the Ukraine and had managed to break through the US 91 cent handle. Investors began the Asian session awaiting the Melbourne Institutes Leading Index which came in at -0.1 per cent which was the same as the previous month’s figures. As the Asian session digressed the Aussie slid lower however stayed very close to opening numbers. Asian trade was as expected extremely quiet as all eyes turned to the US Federal Reserve for the monthly FOMC meeting. At the meeting the US Federal reserve announced that they would taper their monthly purchase of assets by another US10 billion to US55 billion. This announcement sent the AUD sharply down touching lows of 0.9022 over a cent below Wednesday’s high. The Aussie opens today at 0.9040 substantially weaker against the Greenback as all eyes turn to further US data overnight and the continuing development of the crisis in the Ukraine.  

• We expect a range today of 0.8985 – 0.9085

New Zealand Dollar:

After having one of the stronger performances against the US dollar on Wednesday out of the major currencies the NZ dollar traded in an extremely tight 20 point range during the Asian session. The only piece of local data released was the Current Account which had a minimal effect on the currency pair. Record dairy exports helped the Current account’s deficit fall to NZ7.5 Billion which was slightly above forecasts. The quiet day in the market was as expected whilst investors waited on offshore impact from Europe and the FOMC meeting out of the US to give direction.  When the US Federal Reserve met Thursday morning the announcement was to taper the monthly bond buying program by US10 billion dollars as expected and the NZ dollar fell abruptly against a strong US dollar. The Kiwi touched lows of 0.8532 opening today at 0.8563 over half a per cent lower than yesterday. Investors will watch local GDP figures early on for direction.

• We expect a range today of 0.8505 – 0.8615

Great British Pound:

The British Pound was one of the more heavily affected currencies by the crisis out of the UK and spent the majority of Wednesday gaining back loses against the higher yielding currencies. During Asian trade the Sterling managed to touch highs of 1.8225 and 1.9290 versus the AUD and NZD respectively. The GBP however did not move too heavily against the US managing to stay within 15 points of the open. Overnight the British Pound strengthened across the board on the back of strong local data. The figures showed the unemployment rate remained steady at 7.2 per cent and the number of claims for unemployment benefits decreased last month by 34,600. This exceeded expectations for a decline of 25,000 and the previous month’s fall of 33,900. The UK also saw an upgrade to growth forecasts and halving of a budget deficit in the newly released budget while the monthly minutes showed positive signs for the UK’s economy. The Sterling managed to gain heavily against the higher yielding currencies on the back of the strong economic signs touching highs of 1.8323 and 1.9374 versus the Aussie and Kiwi. The GBP opens today stronger against both the AUD 1.8280 and NZD 1.9302. The British Pound’s intraday highs of 1.6652 against the Greenback were evaporated today after the US Federal Reserve decided to further taper opening this morning at 1.6535 substantially weaker than Wednesday

• We expect a range today of 1.8205 – 1.8375

Majors:

The Euro has had very minimal movement against the US dollar recently however has gained slightly over the past few days. On Wednesday the EUR traded in another tight 10 point range making highs of 1.3933 and lows of 1.3923.

Overnight in the main data release for the week the US federal reserve announced they will begin to taper monthly bond buying program by another US10 billion. This brings the monthly buying program to US55 Billion. Investors saw the guidance from the US fed as an indication the US may see a rate rise sooner than expected after the tapering was complete. The Fed also widened the range of factors they will be looking at before considering a rate rise where as previously the unemployment figure of 6.5 per cent was being heavily focused on. After the announcement stocks in the US fell however the Greenback was significantly stronger across the board.

All eyes to tonight will turn back to Europe and the continuing crisis in the Ukraine as well as Unemployment claims, Existing Home Sales and the Manufacturing index out of the US.

Data releases:

• AUD: RBA Bulletin
• NZD: GDP q/q
• JPY: BOJ Gov Kuroda Speaks
• GBP: CBI Industrial Order Expectations
• EUR: German PPI m/m, EU Economic Summit
• USD: Unemployment Claims, Existing Home Sales, Philly Fed Manufacturing Index, CB Leading Index m/m, Natural Gas Storage, Bank Stress Test Results