Weaker U.S business spending dampens rate hike expectations

AUD / USD

Expected Range: 0.7150 - 0.7330

The Australian dollar recouped Wednesday’s losses rallying back through 0.72 U.S cents during trade on Thursday. Despite weaker than anticipated private capital expenditure throughout the first quarter the AUD bounced off supports, buoyed by a rebound in oil, to touch intraday highs at 0.7244. Softer than anticipated U.S macroeconomic data and profit taking dampened analyst hopes of a June rate increase as investors adjusted expectations surrounding the path of Fed interest rates. Fed Funds Futures indicated those anticipating a June/July lift off slipped to just 26% down from 34% on Tuesday. With little of note on the domestic docket today attentions turn to preliminary U.S first quarter GDP numbers and Fed Chair Janet Yellen for direction into the close and weekend.     

NZD / USD

Expected Range: 0.6710 - 0.6810

The New Zealand dollar enjoyed mixed fortunes through trade on Thursday touching intraday lows at 0.6694. The Kiwi suffered heavy selling in early domestic trade following Fonterra’s latest milk price restructuring. The dairy giant lowered its forecasts for production and prices to 4.25 per kilo amplifying the strain suffered across the dairy industry. Touching fresh one and a half month lows the NZD rebounded on softer than anticipated U.S macroeconomic data flows and Greenback repositioning, touching session highs at 0.6765. Attentions now turn to U.S first quarter GDP numbers and Federal Reserve Chairwoman Janet Yellen as markers of likely Fed policy action and direction into the weekend. 

GBP / AUD

Expected Range: 2.0100 - 2.0500

The Great British Pound relinquished some of the week’s earlier gains slipping back below 1.47 through trade on Thursday. Weaker than anticipated housing data coupled with flat first quarter growth amplified the slowdown across the British economy. With attentions squarely focussed on political uncertainty macroeconomic indicators have been largely ignored of late however a string of weaker data sets has led to increasing concerns surrounding the direction of the BoE next policy move with some investors suggesting the Monetary Policy Committee will be forced to cut rate or at the very east extend its neutral policy setting well into 2017 in a bid to stimulate growth and revive the recovery. 

USD, EUR, JPY

The U.S dollar edged lower across the board through trade on Thursday following a softer than anticipated core durable goods print and weakness across business spending expectations. While orders for long-lasting manufactured goods soared, non-defence and capital goods edged lower marking the third consecutive monthly decline in business expenditures. The weak print dampens expectations the Fed may raise rates as early as June and investors continue to look toward September as a launching pad for tighter monetary policy. The Greenback slipped back through 110 JPY touching intraday lows at 109.43 while the Euro rallied 70 points touching intraday highs at 1.1215. Attentions today turn to preliminary first quarter GDP data and Fed Chair Janet Yellen. Markets anticipate a poor read after a sluggish first quarter with any upside surprises only spurring calls for a short term policy adjustment. Investors will be keenly attuned to the rhetoric Yellen chooses to adopt with the Fed Chair unlikely to promise anything the FOMC cannot deliver. We expect some volatility leading into close as markets position themselves ahead of the Memorial day long weekend.