AUD suppressed by weaker Iron Ore prices

Australian Dollar:

With no domestic data available yesterday the Australian dollar was left to offshore vices for direction. Softer Iron Ore prices forced the Aussie lower in early trade reaching an intraday trough of 0.9229 before improved risk sentiment supported a move higher. The currency then bounced within a 20 point range between 0.9260 and 0.9280 for the remainder of Tuesday’s trading session. With the economic calendar still heavily laden with US headline data the tone for the week remains bearish. Expectations of strong data have suppressed the AUD this week with focus now turning to US GDP numbers. If analyst expectations of 1.2% growth are met then downward pressure on the Aussie may force the currency through support at 0.92.   

• We expect a range today between 0.9210 – 0.9310

New Zealand Dollar:

The NZD opens relatively unchanged this morning as Yesterday’s trade balance numbers wrote in right on market expectations. Moving marginally higher throughout the day the NZD responded to improving risk sentiment sparked by softer than expected US imposed sanctions on Russia closing the session and opening this morning just above 0.8550. Attention turns to the ANZ’s business confidence report for domestic direction with headline US data governing offshore movements.

• We expect a range today between 0.8520 – 0.8620.

Great British Pound:

Sterling moved lower overnight trimming recent gains spark by strong growth prospects. Weaker than expected first quarter GDP numbers surprised analysts and forced the Pound to dip sharply downward before support was found and the currency held onto the 1.68 handle. As markets adjusted to the softer number the longer term follow through was muted as the 0.8% GDP increase when compared with Sterling’s main trading partners is positive. With many traders still holding long positions it will take a larger shift in economic outlook to force the currency lower and we open this morning just below the recent 4 year high at 1.6825.

• We expect a range today between 1.8130 – 1.8220

Majors:

Yesterday the US Dollar, despite weaker consumer confidence, reversed some of the losses suffered against is European Counterpart over the past week as a 5 day Euro rally was halted. Weaker than anticipated German inflation numbers sparked speculation the ECB will be forced to further loosen monetary policy in a bid to foster growth. The poor reading hampers optimism that today’s Euro Zone CPI estimates will move into the Central Banks medium term target bracket around 2%. Having reached an intraday high of 1.3879 the bloc unit opens over half a cent lower trading at 1.3809 this morning.

The Japanese Yen also suffered yesterday as US imposed Russian sanctions were not as aggressive or hard lined as first expected. While the threat of Ukrainian unrest still looms its impact on risk appetite has been muted and the Yen, as a safe haven asset, fell 0.3% against its US counterpart.  

Attentions now shift to US GDP numbers tonight as a marker for further direction while longer term focus eyes the Federal Open Market Committee meeting Thursday morning.

Data releases

• AUD: Private Sector Credit
• NZD: ANZ Business Confidence Report
• JPY: Manufacturing PMI, Prelim Industrial Production, Average Cash Earnings, Monetary Policy Statement, Housing Starts, BoJ Outlook Report and BoJ Press Conference
• GBP: MPC Member Dudley Speaks      
• EUR: French Consumer Spending, Spanish Flash GDP, German Unemployment, Italian Unemployment Change, Eurozone CPI Estimates and Italian Prelim CPI.
• USD: ADP Non-Farm Employment Change, Advanced GDP, Employment Cost Index, Chicago PMI, FOMC Statement, Federal Funds Rate and Crude Oil Inventories.