The promise of European monetary stimulus boost demand for higher yields

AUD / USD

Expected Range: 0.7380 - 0.7500

The Australian dollar held firm throughout Thursday trade maintaining a tight band and embracing moves beyond 0.74 while struggling on rallies approaching 0.75 U.S cents. With little macroeconomic data on hand to drive direction the Aussie took its cues from risk and yield flows. Suggestions both the ECB and Bank of England will look to adopt accommodative monetary policy platforms and employ greater stimulus measure throughout the European summer to combat the Brexit impact affirmed investor expectations for a prolonged period of easy money. The dovish assessments saw investors hold onto higher yielding assets helping the AUD and ensuring the commodity linked unit remained well bid. Attentions today turn to manufacturing data across domestic dockets while Brexit fall out remains the primary focus driving directional flows ahead of next week’s RBA meeting.  

NZD / USD

Expected Range: 0.7050 - 0.7200

The New Zealand dollar edged higher through trade on Thursday touching intraday highs at 0.7141. Comments from Bank of England Governor Mark Carney and whisperings from ECB officials suggesting looser monetary policy would be employed through the short-medium term helped fuel demand for the Kiwi as investors continued to chase a higher yielding return. With little of note on the domestic docket through trade on Friday investor demand will again be driven by risk and yield flows in the wake of the Brexit referendum.  

GBP / AUD

Expected Range: 1.7450 - 1.8150

The Great British Pound moved lower through trade on Thursday edging back toward 31 year lows and slipping below 1.33. Comments from Bank of England Governor Mark Carney fuelled the self-off suggesting a sustained period of accommodative monetary policy and the introduction of increased stimulus measures were prudent in combatting low inflation and diminished growth prospects. The promise of extended periods of easy money in combination with political uncertainty will continue to weigh on the Pound in the weeks and months ahead with little upside potential in site. 

USD, EUR, JPY

The U.S dollar snapped a 2 day downturn rallying against the Euro and JPY through trade on Thursday. Suggestions the ECB would be forced to adopt a more aggressive monetary easing platform to cope with the fallout from Britain’s European exit forced investors to shelve the 19 nation combined unit. The Euro shed some 130 points throughout the course of the day touching intraday lows at 1.1031 before profit taking and technical supports kicked in. Comments from Central Bank President Mario Draghi mid-week suggesting the Brexit would wipe 0.5% of GDP estimates through the coming quarters did little to heighten market confidence and highlighted the struggles facing monetary policy makers. There remains a sense that markets and traders are simply positioning themselves for further corrections as the impact of Brexit on growth and financial stability are realised. Attentions today turn to a raft of manufacturing numbers across Europe, Japan and the US for macroeconomic guidance while risk flows and Brexit fall out will continue to dominate direction through trade on Friday.