Rates on hold as Aussie rallies

Australian Dollar:

The Australian dollar settled into Tuesday’s Asian session on the back of a strong previous night holding its ground against the US dollar. The Aussie began the day drifting upwards against the greenback as investors waited on the trade balance figures before midday. The Australian Trade Balance came in worse than expected at 731 Million for March which was a fair way off the 1.26 Billion in February. Forecast was for an increase to 1.1 Billion. The Aussie dollar slipped 14 points on this news however managed to make back the gains shortly after. As the day progressed investors waited cautiously on the RBA’s statement and a decision on the cash rate. The Reserve bank of Australia decided to keep rates on hold at 2.5 per cent stating that they will remain steady for some time. Reserve Bank Governor Stevens stated a slowdown in Chinese growth is a concern however the other countries economic positions seem to be improving. Stevens also added the Employment market and exchange rate are two factors which are not at desirable levels at the moment, nonetheless local economic conditions have progressed. The AUD rallied on the back of the rate hold up 29 points and broke the US93 cent handle. Soon after however the Aussie quickly retraced back the gains to levels before the announcement of 0.9280. As the European session commenced the Australian dollar began to rally and overnight continued to gain helped by weaker than forecast US data. The Aussie opens significantly stronger this morning only 16 points off daily highs against the Greenback today at 0.9351. Today all eyes will be on retail sales figures released just before midday.

• We expect a range today of 0.9305 – 0.9390

New Zealand Dollar:

The New Zealand dollar has been one of the stand out performers recently and the higher yielding currency’s form continued into Tuesday. As the day digressed the NZ dollar drifted higher in subdued trade on the back of absence of local figures. The NZ dollar’s biggest move for the day came on the back its cross-Tasman counterpart’s cash rate decision. The Kiwi jumped on the back of the Reserve Bank of Australia’s rate hold 13 points however sharply moved back to 0.8700 against the Greenback the same point as before the data was released. During the beginning of Euro trade the Kiwi managed to heavily gain against its US rival jumping to highs of 0.8778. The broad NZ dollar strength was held overnight and we see the higher yielding currency open today at 0.8751 nearly 1 cent higher than Tuesday’s open. This morning the local calendar brings about a heavy data release for the Kiwi as investors will be watching carefully at the announcement of employment figures.

• We expect a range today of 0.8700 – 0.8790

Great British Pound:

The British Pound surprisingly managed to gain ground on Tuesday in the Asian session against the US dollar in trade which is normally fairly subdued. During the morning the GBP managed to advance to highs of 1.6893 against the US nearly 30 points higher than the open. The Sterling had a similarly eventful day against the Kiwi and Aussie dollar on Tuesday. The volatility for the higher yielding currencies occurred after the Reserve bank of Australia made the decision to keep rates on hold at record lows. After the announcement the GBP lost 46 points against the Aussie and 23 points against the Kiwi however quickly retraced all the gains, managing to advance a further 25 and 20 points respectively touching daily highs of 1.8210 and 1.9440. Overnight the Services PMI data helped the British Pound gain to levels not seen in five years against the US dollar reaching 1.6995. The strong data has re-enforced the speculation that the economic recovery in the UK is well underway and the Bank of England may be ready to lift rates as early as quarter 1 next year. Soft US data later on did not help the Greenback and the Sterling opens significantly stronger at 1.6975 over a cent higher than Tuesday this morning. On the other side of the equation the Sterling lost ground against the higher yielding currencies opening today at 1.8161 and 1.9417 against the AUD and NZD respectively. All eyes will be focused closely on the Bank of England as they will announce their interest rate decision on Thursday in the UK.

• We expect a range today of 1.8110 – 1.8205

Majors:

The Euro similarly to the GBP had a slightly more eventful Asian trade than normal. The EUR spent the majority of the day drifting upwards against the Greenback touching highs of 1.3884, 12 points off daily lows. 

Overnight the Euro continued to gain versus most majors reaching levels not seen in over 7 weeks against the US dollar after a string of positive data releases from the Euro Zone. EuroZone retail sales was shown to gain 0.3 per cent beating out forecasts for a -0.2 per cent drop. The PMI figures released out of Spain, Italy and the EuroZone were all on Forecast or positive and investors saw this as a strong sign of continued economic recovery. The Euro managed to touch highs of 1.3953 opening today at 1.3928 nearly half a cent higher than yesterday.

Investors will now turn to talks from European Central bank President and Vice President during Euro trade. In the US session the US Unemployment Claims and a speech by Federal Reserve Chair Janet Yellen will be the main focus.

Data releases:

• AUD: AIG Construction Index, Retail Sales m/m
• NZD: Employment Change q/q, Employment Rate, Labour Cost Index q/q
• JPY: Monetary Policy Meeting Minutes
• GBP: BRC Shop Price Index y/y
• EUR: German Factory Orders m/m, French Industrial Production m/m, French Trade Balance, Retail PMI
• USD: Prelim Nonfarm productivity q/q, Prelim Unit Labour Costs q/q, Fed Chari Yellen Testifies, Crude Oil Inventories, 10-y bond Auction, Consumer Credit