Rates on hold as Aussie lifts to yearly highs

Australian Dollar:

The Australian dollar had a heavy economic docket on Tuesday as investor’s awaited manufacturing data out of China and the RBA’s cash rate decision. The Chinese manufacturing number was first off the block and both of the numbers printed showed expansion. The figures released were the best for the year and is a positive sign for Australia’s largest trading partner after the last two quarters showed a contraction. The Australian dollar did not react too rapidly to the positive news as the market looked to be waiting on the RBA later in the afternoon. The Reserve Bank of Australia decided to leave the cash rate at record lows of 2.5 per cent and onlookers finally saw volatility in the higher yielding currency. The Aussie lifted nearly half a cent touching highs of 0.9452 as the board ruled it believed the monetary policy is “appropriately configured” and will help inflation stay on target. The mention of a “period of stability” was once again noted giving investors an idea of the RBA’s stance for future rate announcements. Overnight the Aussie continued its gains reaching highs for the year above 95 US cents on the back of another US session with less than promising data opening this morning at 0.9493. 

• We expect a range today of 0.9445 – 0.9535

New Zealand Dollar:

The NZ dollar spent Tuesday trying to gain back ground after poor ANZ business confidence released earlier in the week. There was no local data out today however Chinese numbers were to provide direction as China is one of New Zealand’s largest trading partners. The Manufacturing figures recently have been less than optimal over the last couple months however the last 2 prints have been expansionary. The Manufacturing release showed an expansion and this allowed the NZ dollar to drift upwards against its US counterpart gaining nearly a quarter of a cent from the open. Overnight the NZD continued to climb after less than optimal numbers were released from the US opening stronger this morning at 0.8775. Today will be another day with lacklustre economic data out of NZ and investors are likely to turn offshore for direction.

• We expect a range today of 0.8735 – 0.8815

Great British Pound:

The British Pound continued its march towards a 6 year high against the US dollar after another US session with soft data and UK trade where the manufacturing numbers were better than expected. The Manufacturing industry was shown to have grown at its fastest pace in 7 months at 57.5 versus a forecast of 56.7. This is a good sign for the UK economy which seems to be on the right track to a strong recovery. The impressive numbers as of late are continuing to bring about further speculation that the Bank of England will raise interest rates in a shorter time frame than previously expected. The Sterling was strong against the Euro and the US however strong Chinese numbers in Asian trade impeded on gains against the Aussie and Kiwi.

• We expect a range today of 1.8010 – 1.8110

Majors:

The Euro struggled against an otherwise weak US dollar overnight as Eurozone numbers were shown to disappoint. Although Spanish manufacturing numbers were stronger than expected and are a good sign for the struggling Spanish economy this was not enough to offset poor Italian manufacturing figures and less than desirable unemployment numbers. The German unemployment figures showed an increase of 9,000 which was on the back of a forecast for a reduction of 9,000. The unemployment rate across the Eurozone although beating forecast still remained at an undesirable 11.6 per cent the same as previous figures as the markets watched the Euro slide across the board. The US data printed later on was not much better in another night of mixed results. The main data for the night, ISM manufacturing was less than anticipated however onlookers still believe that is a reasonable number and one in line with US economic recovery. The US was able to gain on the Euro as the EUR/USD opens this morning at 1.3675. Today all eyes will be on Fed Chair Janet Yellen’s talks in the lead up to Non-Farm Employment figures on Thursday.

Data releases:

• AUD: Trade Balance, RBA Assist Gov Debelle Speaks
• NZD: ANZ Commodity Prices m/m
• JPY: Monetary Base y/y
• GBP: Nationwide HPI m/m, Construction PMI
• EUR: Spanish Unemployment Change, Final GDP q/q, PPI m/m
• USD: Challenger Job Cuts y/y, ADP Non-Farm Employment Change, Factory Orders, Crude Oil Inventories, Fed Chair Yellen Speaks