AUD edged lower on commencement of ECB QE plans

Australian Dollar:

The Australian dollar traded sideways for much of the domestic session Thursday bouncing about between 0.7810 and 0.7840. Stable retail sales and a relatively unchanged trade balance report offered little to excite investor action with trader’s content to remain on the sidelines leading into the ECB’s policy announcement. Mario Draghi’s dovish address and confirmation the European Central Bank will begin the outright printing of money on March 9 sent the AUD back below 0.78 US cents as investors supported a Greenback rally. Opening this morning at 0.7770 having touched overnight lows of 0.7753 attentions now turn to Fridays critical Non-Farm employment change report for direction into the weekend; a read above or close to the 235K expected could prompt further USD strength and the send the AUD toward five and a half year lows at 0.7626 while a poor print will lend short term support to the Aussie.

• We expect a range today of 0.7620 – 0.7900

New Zealand Dollar:

The New Zealand plunged lower throughout trade on Thursday with investors looking to take profit on NZD positions as the RBNZ ponders new rules to cut foreign property investment. Much like its Australian counterpart the NZ property market is booming (particularly in Auckland) and the country’s Central bank is fighting a battle against rising house prices and generally soft price action everywhere else. Markets responded by dumping the Kiwi sending it toward support at 0.7450 in anticipation interest rates will remain on hold into the foreseeable future. Focus now shifts to US labour market data as the primary directional driver into the weekend.  

• We expect a range today of 0.7380 – 0.7580

Great British Pound:

Much like its US counterpart the Great British Pound surged to post GFC highs against the Euro as the ECB confirmed it will commit to outright money printing until September 2016. Contrasted against the BoE’s neutral policy stance Sterling touched 7 year highs of 0.7223 pence per euro but edged lower breaking below 1.5250 against its US counterpart. Despite a string of positive macroeconomic indicators throughout February prompting speculation the BoE may be forced to raise rates sooner than anticipated Governor Carney offered little outside his standard rhetoric in yesterday’s monthly rate address. Attentions now turn to US labour market data for Cable direction into the weekend.  

Majors:

In the aftermath of the ECB’s rate announcement and quantitative easing program outline the Euro fell below 1.10 for the first time since September 2003. Investors sent the 19 nation shared currency to intraday lows of 1.0987 when Mario Draghi confirmed the ECB would begin purchasing government bonds next week as the Central Bank begins its QE program in the fight to stave of stagflation and prompt growth throughout the tepid Eurozone.

The Greenback continued its upward trajectory as the dollar index touched an eleven and a half year high through trade on Thursday. As markets looked to short Euro positions the USD rallied across the board pushing through 96.45 on an indexed basis against a basket of currencies (its highest level since late 2003) while breaking back above 120 Japanese Yen. The ECB’s commitment to purchase 60b Euro a month through until September 2016 highlighted the divergence in central bank monetary policies and with speculators jumping behind a September Federal Reserve rate increase the number of USD long contracts surged.

Attentions now turn to Friday’s crucial Non-Farm payroll report. With markets anticipating another 235,000 jobs will have been added to the economy throughout February a read that falls short of the mark will likely prompt some USD selling into the weekly close as labour market strength remains a driving force propping up the Greenback.  

Data releases

• AUD: AIG Construction Index
• NZD: No Data
• JPY: Leading Indicators
• GBP: Consumer Inflation Expectations
• EUR: German Industrial Production, French Government Budget Balance, French Trade Balance and Revised GDP q/q
• USD: Non-Farm Employment Change, Unemployment Rate, Average Hourly Earnings, Trade Balance and Consumer Credit.