AUD edges higher ahead of FOMC minutes

Australian Dollar:

The Australian Dollar edged higher during trade on Monday as markets revised positions and expectations of an early Fed rate hike in the lead up to Wednesdays FOMC June minutes.  With little on the domestic calendar to drive direction the Aussie slowly ticked higher throughout the day having seemingly recovered from Glen Stevens dovish jawboning last Thursday. With interest rates at record lows it seems markets no longer fear verbal threats of RBA rate cuts and the rapid dumping of the Aussie looks to have runs its course for now.  Attention now turns to NAB business confidence as today’s big ticket item ahead of key unemployment data Thursday and offshore stimuli in the form Chinese CPI Wednesday.

• We expect a range today between 0.9320 – 0.9420

New Zealand Dollar:

Much like its Trans-Tasman rival the New Zealand dollar moved higher throughout trade on Monday regaining much of the losses suffered toward the end of last week. The Kiwi moved back through 0.8750 as investors returning from the Independence Day long weekend looked to square positions leading into Wednesdays FOMC June minutes. Central bank policy has been a key driver of currency direction as market volatility reaches all-time lows and investors keenly await further signals and guidance from the US Federal Reserve as to the direction of interest rates. Domestically attention turns to NZIER Business Confidence for further direction today.   

• We expect a range today between 0.8680 - 0.8780. 

Great British Pound:

The Pound moved lower yesterday as speculation the Federal Reserve may look to raise rates sooner eroded some of the gap in Central Bank monetary policy. Strong data and hawkish BoE officials have bolstered expectations of an early rise in UK interest rates and helped push sterling through 5 year highs. But has the rally run out of puff? There is a suggestion that with a slowdown in futures trading and Bullish Bets having hit 7 year peaks that the potential for fresh GBP buying has been drastically reduced. Opening this morning at 1.7125 focus shifts to Manufacturing Production as the headline data piece. With investors keenly focused on central bank policy and possible yield divergence we expect Sterling to remain relatively range bound in the lead up to US Fed minutes and Thursday’s MPC rate announcement and statement.  

• We expect a range today between 1.8220 – 1.8380 

Majors:

The USD edged marginally lower throughout trade on Monday as markets re-assessed their expectations of an early Federal Reserve rate hike. Market sentiment appears mixed with Goldman Sachs bringing forward its IR forecasts while other analysts see an inflationary rate below the Fed’s target 2% as a critical barrier restricting yields. With little headline data available today investors keenly await Wednesday’s release of FOMC (Federal Open Market Committee) June meeting minutes for further insight into the Central Banks psyche.

The Euro opens relatively unchanged this morning holding onto 1.3600 at time of writing. Yesterday saw softer German Industrial production offset by an uptick in consumer confidence and squaring of USD positions ahead of Wednesday’s FOMC minutes. The economic docket offers little to prompt strong investor moves and analysts will look to Wednesday evening and ECB president Mario Draghi for further direction as he addresses the Tommaso Padoa-Schioppa Memorial Lecture, in London.

Data releases

• AUD: NAB Business Confidence           
• NZD: NZIER Business Confidence
• JPY: Current Account, Bank Lending and Economy Watchers Sentiment
• GBP: Halifax House Price Index m/m, Industrial Production m/m, Manufacturing Production m/m and NIESR GDP Estimate.
• EUR: German Trade Balance, French Budget, French Trade Balance and ECOFIN Meeting
• USD: JOLTS Job Openings, FOMC Member Kocherlakota Speaks, NFIB Small Business Index and Consumer Credit.