US dollar gains on strong inflation data

Australian Dollar:

The Australian dollar kept up its recent form of strength on Tuesday managing to climb from the open against the US dollar reaching highs of 0.9423 early on in the Asian session. The Aussie levelled out after the small climb as investors awaited monetary policy meeting minutes out locally just before midday. Moments before the minutes the AUD dropped 17 points against the US dollar managing to stay just above US94 cents however after the announcement the Aussie continued to fall another 10 points down to 0.9391. The meeting minutes pointed out that the Reserve Bank of Australia will be hesitant to lift interest rates until the job market improves. The current unemployment rate sits at 5.8 per cent however recent volatility in the employment figures will lead to a cautious approach when the RBA makes their decision on interest rates. The RBA has stated they are looking for a period of “stability” with regards interest rates for the time being. Through the rest of the day the AUD held its ground trading just below the US94 cent handle moving within a very tight margin. Overnight the Aussie finally succumbed to strong US data and dropped sharply to touch lows of 0.9335 however managed to consolidate slightly higher to open today at 0.9360 against the Greenback. Investor’s eyes will be focused on heavy Chinese data out at midday today and the US Federal chair reserve Janet Yellen as she speaks for a second consecutive night this evening

• We expect a range today of 0.9315 – 0.9405

New Zealand Dollar:

With Tuesday being the second consecutive day with no local data the New Zealand dollar looked offshore for guidance. After a strong start to the week the Kiwi has managed to shrug off impressive US figures to remain close to the US87 cent handle. As the Asian session began the NZD started to slowly drift downwards in a market where trade appeared to be fairly subdued. The Kiwi’s biggest movement for the day came after the Australian monetary policy meeting minutes were released dropping around 20 points to 0.8670. As the remainder of the day continued the NZ dollar continued to slide reaching lows around half a cent lower than the open price. Overnight the higher yielding currency was heavily affected by the second consecutive night of positive figures out of the United States. The Kiwi fell after key data releases touching lows of 0.8626 and opens this morning weaker than Tuesday at 0.8644. Investors today will welcome the first NZ data release this week as the CPI is announced early in the day as well as Chinese production and GDP figures out later this afternoon. 

• We expect a range today of 0.8605 – 0.8690

Great British Pound:

The Great British Pound has been one of the currencies this week lacking volatility due to the absence of local data however lasts nights trading session was packed with heavy figure releases from the UK. To start the Asian session the GBP opened at similar levels to Monday against the US dollar and slowly drifted lower although trade was kept in a narrow 20 point margin. Against the higher yielding currencies the GBP moved in the opposite direction trending upwards as the Monetary Policy Meeting minutes out in Australia pushed the AUD and NZD lower. Overnight the UK released inflation figures that were on forecast of 1.6 per cent. These figures allowed the Sterling to shrug off strong US inflation data later on and the British Pound held steady. Today we see the GBP open at similar levels to yesterday of 1.6721 against the Greenback. Conversely the higher yielding currencies, the AUD and NZD did lose ground on the back of the strong UK data overnight. The GBP touched highs of 1.7923 and 1.9414 against the AUD and NZD respectively after the inflation figures were released. The Aussie and Kiwi however did manage to recover slightly as the night progressed opening today nearly a cent higher against at 1.7871 and 1.9342. Today will be another UK session filled with important data and investors will watch closely for further guidance.

• We expect a range today of 1.7825 – 1.7920

Majors:

With a European and US session lined up with important figure releases the Euro and US dollar remained fairly quiet during Asian trade. The currency pair opened at 1.3817 and barely moved from this mark trading in a narrow 8 point range.

Overnight all eyes turned to the Inflation forecasts from the US. The data released was positive coming in 0.1 per cent ahead of forecast at 0.2 per cent. The release helped the US dollar rally however the upside was limited as these figures are widely regarded by the US Federal Reserve as below where expectations currently sit. This positive data is however widely viewed as enough to see the US Fed continue to taper the monthly asset purchase program which at the moment sits at US55 billion a month.

In Europe the Euro felt the pressure as the German ZEW consumer sentiment was released and figures were shown to be sitting at an 8 month low. The data came in at 43.2 which was 3.1 below expectations.

Overall the Euro did manage to consolidate slightly higher as the session came to a close however opens weaker against the US today at 1.3813. All eyes tonight will be focused on inflation data from Europe whilst in the US Building permits and a talk by US Fed Chair Janet Yellen will be the main event.

Data releases:

• AUD: MI Leading Index
• NZD: CPI q/q
• JPY: Revised Industrial Production m/m, BOJ Gov Kuroda Speaks
• GBP: Claimant Count Change, Unemployment Rate, Average Earnings Index 3m/y
• EUR: CPI y/y, Core CPI y/y, German 10-y Bond Auction
• USD: FOMC members Kocherlakota, Stein and Fisher Speak, Building Permits, Housing Starts, Capacity Utilization Rate, Industrial Production m/m, Crude Oil Inventories, Fed Chair Yellen Speaks, Beige Book