Aussie sinks on poor CAPEX outlook

Australian Dollar:

The Australian dollar continued to spiral downward through trade on Thursday as a quarterly Private Capital Expenditure report printed well below market expectations. Private CAPEX fell 4.4% in the first quarter of 2015, a contraction which almost doubled market estimates and sent the AUD tumbling through 0.77 U.S cents toward fresh six week lows. The poor print highlights the battle facing the RBA in stimulating economic growth in sectors outside mining. Mining expenditure fell sharply while manufacturing and other industries failed to pick up the slack leaving the door open for another downward rate adjustment. The Aussie opens this morning at 0.7645 as attentions turn New Home sales domestically while a Prelim US GDP report will dominate the docket leading into the weekend.

• We expect a range today of 0.7580 – 0.7730

New Zealand Dollar:

The New Zealand dollar plummeted Thursday moving from early session highs of 0.7266 to touch intraday lows of 0.7128. The spark that forced the downward run was news that Fonterra would lower its payout for dairy products to $4.40 a kilo, the lowest price in 8 years and a strong indicator that global markets are over-supplied. Dairy is one of New Zealand’s largest export sectors and the price reduction has dramatically reduced the Terms of Trade balance. Breaking technical supports at 0.7180 and 0.7150 attentions turn to ANZ business confidence for direction through Friday with investors keenly watching the market close for trend guidance. A read below 0.7180 could lead itself to a deeper bearish dip and psychological support at 0.70 may be tested while top side resistance seems at 0.73 will likely cap any significant upward push.    

• We expect a range today of 0.7075 – 0.7275

Great British Pound:

The Great British Pound edged lower Thursday as secondary GDP estimates missed the mark and investor’s extended USD long bets on expectations the US Federal Reserve will raise interest rates off record lows before the years end. Improvements in business investment and mortgage approvals helped slow the downward push and technical support kicked in on moves below 1.5275. Cable opens this morning buying 1.5315 U.S cents as attentions turn to US GDP reports for direction into the weekend.

• We expect a range today of 1.9800 – 2.0200

Majors:

Monetary policy expectations helped the U.S Dollar touch twelve and a half year highs against the Japanese Yen as markets prepare for a prolonged period of BoJ quantitative easing while expectations of a year-end Federal Reserve rate adjustment continue to grow. A stable unemployment print and strong pending home sales report helped bolster claims the economy is recovering from its anaemic first quarter and support suggestions the slowdown was an anomaly that will be reversed leading into the second half of the year. Touching 124.46 the USD gave back much of the advance leading into the daily close as comments from Japanese finance minister Taro Aso hinted at a BoJ intervention should the Yen continue to tumble. The Euro held gains as markets cling to the hope European Creditors and Greece will come to an agreement on reform and advance the next tranche of debt assistance before the cash-strapped nation is forced to default on its current loans. Attentions will be squarely focused on US prelim GDP number and the ongoing Greek debt negotiations for direction into the weekend.

Data releases:

• AUD: HIA New Home Sales m/m and Private Sector Credit m/m
• NZD: ANZ Business Confidence and Building Consents
• JPY: Household Spending, Tokyo Core CPI, National Core CPI, Unemployment Rate, Prelim Industrial Production and Housing Starts.
• GBP: GFK Consumer Confidence         
• EUR: German Retail Sales m/m, French Consumer Spending, Spanish CPI, Private Loans, M3 Money Supply and Italian Prelim CPI.
• USD: Prelim GDP, Chicago PMI and Revised Consumer Sentiment