Aussie range bound as heightened political uncertainty weigh on the Euro

AUD / USD

Expected Range: 0.7600 - 0.7730

Once again it was a fairly lackluster day for the Australian dollar, slowly moving to an overnight low of 0.7650 before the USD was sold off across the board on a lower than expected Manufacturing PMI reading. Starting the day at 0.7685, the Aussie dropped twenty points on the release of the RBA monetary minutes highlighting disappointing GDP growth for the third quarter.  They also noted the “deprecation of exchange rates since 2013 had assisted the economy in its transaction following the investment boom”. Investors looks to Governor Philip Lowe’s speech this morning at this year’s Australia-Canada Leadership Forum along with domestic wage price data where the annual growth rate has fallen every quarter bar one, since 2012. The Australian Dollar has squared overnight losses and opens at 0.7680.

NZD / USD

Expected Range: 0.7080 - 0.7240

The New Zealand dollar moved marginally lower through trade on Tuesday touching intraday lows at 0.7130. The Kiwi came under selling pressure following a softer than anticipated Global Dairy Trade Auction in which prices for whole milk powder fell 3.7%. The poor print comes after marked declines in early January and December forcing prices toward March 2015 highs. A break below this level may erode confidence in the recovery and spark a deeper price drop. With Fed officials spruiking a hawkish tone attentions now turn to the FOMC meeting minutes for direction through trade on Wednesday. 

GBP / AUD

Expected Range: 1.6150 - 1.6350

Following the Bank of England’s February Inflation report the Great British Pound came under selling pressure moving from 1.2475 touching a low of 1.2400. The UK posted a surplus in 6 months however it fell short of expectations 9.8 billion vs 14.4 billion. Adding fuel to the fire was comments by MPC member Gertjan Vlieghe that economic forecasting can never be completely accurate and that they probably will not forecast the next financial crisis or next recession. Last year it had anticipated an economic slowdown after the Brexit vote but in fact the economy continued to grow and weathered Brexit quite well. In other news, UK Public Sector Net Borrowing  showed a smaller-than-expected surplus in January of 9.4 billion Pounds, UK Chancellor MR Hammond intends to bring Britain’s Budget down to 3.5% of GDP. Investors turn to UK’s Second Estimate GDP data today. 

USD, EUR, JPY

The Dollar rallied through trade on Tuesday as U.S markets reopened after a long weekend and the Euro suffered heavy selling on heightened political risk. Commentary from Cleveland and Philadelphia Fed officials’ bolstered demand for the world’s base currency as the regional presidents echoed Janet Yellen’s rhetoric of last week, hinting 3 rate hikes throughout the course of the year would still be appropriate. CME’s Fed Watch Tool tracked an increase in those expecting multiple rate hikes while a March policy amendment gained greater momentum advancing some five percent. The Greenback edged back toward 114 JPY breaking through 113.50 while the Euro suffered one its steepest daily depreciations in more than a month. Tumbling through 1.06 and 1.0550 the Euro touched intraday lows at 1.0527 as anti-European Union rhetoric intensifies. As nationalist candidates Marine Le Pen and Gert Wilders gather support in France and the Netherlands there are increasing concerns a shock victory in either country could signal a further European breakup. As attentions remain squarely focused on evolving electoral polls the FOMC/Fed meeting minutes and will provide focussed direction throughout trade on Wednesday.