Ranges steady after mid-week rally

AUD / USD

Expected Range: 0.7650 – 0.7730

The Australian dollar held a tight range throughout much of Friday struggling to break a 35 point trading band. With little domestic data on hand to drive direction investors appeared reluctant to push key technical resistance points and extend gains beyond 0.77. Having rallied strongly midweek in the wake of the Federal Reserve’s dour interest rate outlook the Aussie upturn stalled on moves approaching 0.7730 and wrestled with moves nearing 0.77 U.S Cents. Despite the midweek bounce market participants seemed disinclined to extend upside advances through the medium term with central bank yields expected to narrow throughout the year. While the Fed failed to back calls for three to four interest rate amendments through 2017 there is still an expectation the FOMC will move to tighten monetary policy further and when contrast against the RBA’s neutral monetary policy stance the attractiveness of the AUD as a higher yielding unit begins to diminish. Attentions this week turn to tomorrow’s RBA meeting minutes for further insight into wider monetary policy expectations. 

 

NZD / USD

Expected Range: 0.6975 - 0.7050

The New Zealand dollar traded in a tight fifty-point range to end a busy week for currency markets. The NZD rallied earlier in the week to a high of 0.7050 against the US Dollar as market participants were left disappointed with no change to the so called “dot plot” and the US Federal Reserve hiking interest rates for only the third time since the GFC. Testing 0.7000 intraday, the New Zealand rallied to a high of 0.7040 and opens this morning at 0.7010. An early release of Westpac consumer sentiment saw a decline for the first quarter although had little impact on the local currency. On the docket this week is the only central bank meeting this week on Thursday as the RBNZ expects to keep their official cash rate on hold at 1.75% 

 

GBP / AUD

Expected Range: 1.5930 - 1.6150

The Great British Pound maintained its upward trajectory since the Bank of England kept interest rates on hold Thursday evening. In another central bank twist similar to the ECB, one policy maker Kristin Forbes renown for being hawkish voted for a rate hike and caught the market by surprise. Noting a focus on rising inflation in the BOE minutes, local investors turn its attention to inflation figures for the month of February out on Tuesday 21st at 9:30 GMT. The cable cross has seen higher highs each subsequent day, rallying from 1.2160 to a high of 1.24 not seen since March 1st on the weekly close. GBP/USD opens this morning at 1.2380.

 

USD, EUR, JPY

The U.S Dollar suffered one of its worst weekly performances since July last year in the wake of the FOMC and Federal Reserve’s cautiously optimistic commentary last week with Bloomberg’s spot index touching November low. Despite raising rates the Fed failed to deliver the hawkish assessment sought after by market participants and a rapid unwinding of USD longs forced the world’s base currency lower. Loses were further compounded following victory for Centrist Mark Rutte and his VVD party in the highly anticipated Dutch Election. The win and comprehensive defeat of Nationalist Gert Wilder’s goes a long way in easing perceived political instability across Europe and narrows the chances of French far right candidate Marine Le Pen. The Euro held touched intraday highs at 1.0783 and despite edging marginally into the close held onto gains above 1.07. With little of note on today’s domestic docket attentions this week turn to mid-level data through the first half of the week with commentary from Fed Chair Janet Yellen steering direction into the close.