Pressure mounts on Aussie ahead of RBA meeting

Australian Dollar:

The Australian dollar touched fresh lows Friday easily passing through technical supports at 0.78 to touch intraday lows of 0.7718. In a remarkable close to the month the Aussie has lost almost 5 cents since the Bank of Canada announced a rate cut and the European Central Bank surprised markets with a larger than anticipated quantitative easing package. Markets have dumped the AUD on expectations of easing in the Central Banks monetary policy stance. Falling oil, iron ore and copper prices in combination with slowing Chinese and global growth prospects only add further pain to an already retreating Australian dollar. Focus now turns to the Reserve Bank as it meets tomorrow for the first time in 2015. While last week’s CPI reading offered some reprieve there are strong expectations the Central Bank will choose to lower the benchmark cash rate opening the door for a short term bounce should Glenn Stevens and RBA board hold firm. Attentions today look to China’s HSBC Final Manufacturing PMI report for direction into the new trading week.

• We expect a range today of 0.7680 – 0.7910

New Zealand Dollar:

Much like its Trans-Tasman counterpart the commodity driven New Zealand Dollar has suffered a remarkable and speedy depreciation over the last fortnight. Plummeting milk prices have hampered any meaningful rally of late and the Kiwi has been driven downward on expectations the RBNZ will be forced to maintain its newly dovish stance and possibly look to cut rates throughout 2015 in a bid to foster growth amidst a global economy struggling to find traction. Focus turns to a Chinese Manufacturing report for direction Monday ahead of Global Dairy Prices and employment data Wednesday.

• We expect a range today of 0.7080 - 0.7350

Great British Pound:

Sterling found support above 1.50 into the close on Friday as fourth quarter U.S GDP reports missed the mark. Diverging monetary policy expectations have capped any meaningful Sterling rallies of late and comments from BoE governor Mark Carney on Thursday offered little to suggest the MPC will look to shift its current stance when it meets on Thursday. Attentions first turn to Construction and Services PMI due Tuesday and Wednesday to kick start direction into the week.

• We expect a range today of 1.9310 – 1.9600 

Majors:

The world’s base currency enjoyed a mixed session to close out last week as investors and markets responded to a softer than expected GDP report paired against stronger than anticipated consumer spending. Fourth quarter gross domestic product expanded just 2.6%, a read well below analysts’ expectations and a considerable retraction on the 5% growth enjoyed in the 3rd quarter of 2014. The weaker than estimated reading puts pressure on interest rate expectations and raises questions surrounding the strength of the overall economic recovery.  U.S data flows were mixed throughout the last quarter of last year opening the door for suggestions economists have overestimated the strength of the world’s largest economy. Still, the divergence in Monetary Policy will lend support to the Greenback throughout the months ahead as Europe and Japan struggle to fight deflation.

Attentions this week turn to Manufacturing, Trade Balance and Non-Farm Payroll reports for direction amidst a raft of Political speculation as the new Greek Prime Minister, Alex Tsipras, begins his tour of European finance ministers in a bid to write down Greek debt obligations. French, German and Dutch spokesman have all clearly stated that while they are open to negotiate and alleviate the pace of repayments there will be no cancellations.

Data releases

• AUD: AIG Manufacturing Index, MI inflation Gauge and Commodity Prices y/y
• NZD: No Data
• JPY: Final Manufacturing PMI   
• GBP: Manufacturing PMI
• EUR: Spanish Unemployment Change, Spanish Manufacturing PMI, Italian Manufacturing PMI and Final Eurozone Manufacturing PMI.
• USD: Core PCE Price Index, Personal Spending m/m, Personal Income m/m, Final Manufacturing PMI, ISM Manufacturing PMI, Construction Spending and ISM Manufacturing Prices.