Iron Ore's slump continues to weigh on AUD

Australian Dollar:

The Australian dollars downward trajectory continued through trade on Tuesday as Greenback strength and ongoing weakness across commodity prices dampened demand for the AUD. Iron ore prices yesterday marked their biggest quarterly loss since 2009 as low cost supplies from both Australia and Brazil fill a market deflated by a slowdown in Chinese demand. Touching $51.35 USD a tonne iron ore is now sitting at decade lows and placing considerable strain on the Australian economies earning power. The Aussie found support on dips below 0.76 having touched intraday lows of 0.7590 and we open this morning buying 0.7611 US cents. Attentions now turn to Chinese Manufacturing PMI for further direction, however with expectations for a contractionary print below the key 50 level it is unlikely to offer the stimulus needed to support a relief rally.

• We expect a range today of 0.7510 - 0.7810

New Zealand Dollar:

The New Zealand dollar despite edging marginally lower across the trading day found support Tuesday in improved business confidence. The ANZ’s Business Confidence report showed the 2nd consecutive monthly improvement in business sentiment and the best data print since July 2014. The positive confidence story helped the Kiwi hold onto key technical supports at 0.7450 ahead of a key Chinese Manufacturing PMI account due today. NZD opens this morning buying 0.7476 U.S. cents.

• We expect a range today of 0.7380 - 0.7580

Great British Pound:

The Great British Pound found support yesterday in a market chasing extensions on USD longs. Having touched intraday lows at 1.4755 Cable advanced as GDP and Business investment surpassed expectations while the gap between imports and exports narrowed on an improved Current Account Balance. Gains were capped on levels above 1.4860 and attentions now turn to Manufacturing PMI for direction through Wednesday.

• We expect a range today of 1.9320 - 1.9820 

Majors:

The Greenback advanced again against its European counterpart as investors look to short Euro positions on expectations of widening monetary policy fundamentals. It is widely accepted that the U.S. Federal Reserve will announce an upward revision to benchmark interest rates before the end of 2015 while fresh concerns surrounding Greece’s ability to meet reform requirements has highlighted the contrast in policy directions. The Euro has lost 11% through 2015 already and further moves toward parity can be expected if Greece and Eurozone creditors are unable to compromise on reform. Officials again rejected Greek reform proposals citing their ambiguous nature and failure to truly address economic rebuilding. The USD found added support in a stronger than anticipated consumer confidence report although gains were tempered by a softer Chicago PMI read. US macroeconomic fundamentals continue to fluctuate dictating the Fed’s economic outlook but doing little to sway investor sentiment. Monetary policy expectations continue to drive direction as we look to FOMC members Williams and Lockhart for guidance through Wednesday.

Data releases

• AUD: AIG Manufacturing Index and Building Approvals
• NZD: No Data
• JPY: Tankan Manufacturing and Non- Manufacturing Index and Final Manufacturing PMI
• GBP: Manufacturing PMI
• EUR: Spanish, Italian and Eurozone Manufacturing PMI  
• USD: ADP Non- Farm Employment Change, FOMC Members Lockhart and Williams Speaks, ISM Manufacturing PMI, Construction Spending, Crude Oil Inventories, Final Manufacturing PMI and ISM Manufacturing Prices