Business confidence and carry trades bolster Aussie

Australian Dollar:

The Australian Dollar pushed higher for a 3rd consecutive day recouping much of the losses suffered last week. The dollar broke above 0.94 as National Australia Bank’s Business Confidence report rose to 8. The stronger reading is highest since January and suggests the concerns that arose after the Federal Governments May Budget release now carry less weight. Adding further support to the AUD Tuesday’s session saw strong demand for higher yielding assets and carry trades dominated investor demand. Attention now turns to Westpac Consumer Confidence for domestic direction while Chinese inflation will offer offshore stimuli in the lead up to the FOMC June minutes released this evening. A hawkish slant will further boost speculation of an early Fed Rate hike and back a USD rally.

• We expect a range today between 0.9330 – 0.9480

New Zealand Dollar:

The New Zealand dollar rallied strongly Tuesday challenging 3 year highs and breaking through 0.88. Price action came from the Fitch Ratings agency who affirmed New Zealand’s Credit rating at AA. While two below the top rating they cited a “credible plan to lift the fiscal surplus and entertain supportive macroeconomic policies”. The Kiwi took further support from high yield asset demands as carry trades bolstered emerging market currencies. With a domestic docket free of economic data today direction will come from off shore incentives with Chinese inflation and US central bank minutes the headline data events.  

• We expect a range today between 0.8740 – 0.8880 

Great British Pound:

The Great British Pound dipped below 1.71 for the first time since June 30 yesterday. Manufacturing Production unexpectedly fell 1.3% driving Sterling lower as the currency lost nearly 60 points against its US counterpart and touched session lows of 1.7087. The downward pressure was short lived however and cable ticked higher throughout recouping the knee jerk losses and opens this morning relatively unchanged trading at 1.7125 at time of writing.  Domestic focus now turns to the Bank of England’s monetary policy committee rate announcement and accompanying statement tomorrow with investors keenly seeking further hawkish rhetoric supporting an interest rate hike.

• We expect a range today between 1.8180 – 1.8290

Majors:

The Greenback drifted lower yesterday against higher yielding currencies and emerging markets as demand for higher interest rates supported a session dominated by carry trades. Investors seem wary of buying into any USD rally ahead of the release of the FOMC’s June meeting minutes. Comments from Fed board member Kocherlakota did little to satisfy Dollar bulls as the Bank of Minneapolis President suggested any increase in short term rates likely lies well into the future. The Euro opens relatively unchanged as investors looked to German Trade Balance numbers for domestic price action ahead of Mario Draghi’s upcoming speech this evening, while the Yen too is stronger versus the Greenback. Most market attention will be keenly focused on the Fed minutes today as investors seek an insight into the Central Banks psyche and a guide to possible monetary policy moving forward.

Data releases

• AUD: Westpac Consumer Sentiment      
• NZD: No Data
• JPY: M2 Money Stock
• GBP: Halifax House Price Index
• EUR: ECB President Draghi Speaks
• USD: FOMC Meeting Minutes, Crude Oil Inventories and 10 Year Bond Auction