Australian dollar falls on U.S. Federal Reserve’s outlook

AUD

The Australian Dollar is weaker this morning when valued against the Greenback. The Aussie hit a 24-hour low of 0.7204 after failing once again to sustain gains beyond the 0.7300 figure.

On the data front yesterday afternoon we saw the release of soft Chinese industrial profits data during the session. While profits grew 9.2% from a year earlier in August, that was well below the 16.2% level seen in the 12 months to July. There are no scheduled release today for Australia.

From a technical perspective, the AUD/USD pair is currently trading at 0.7206. We continue to expect support to hold on moves approaching 0.7190 while now any upward push will likely meet resistance around 0.7225.

AUD / NZD

Expected Range: 1.0850– 1.0950

The New Zealand dollar opened yesterday morning at 0.6660 following the release by RBNZ that they would hold interest rates at record lows for the foreseeable future. Guidelines in Governor Orr’s remarks were that the next move could be either up or down but remarked that the cash rate will be around these levels into 2019 and 2020. The central bank also stated that inflation remains in the mid-point of the target range.

The Kiwi dollar saw a linear move downwards for the remainder of the trading session as the greenback gathered strength overnight and continued its momentum following the Federal Reserve’s decision to increase interest rates by 0.25%.

Eventual lows were seen this morning of 0.6610, down 0.7% for the day as we look forward to this morning’s Building Consents release. The NZD/USD cross will look to retest support to end the week at the US 66 cent handle.

The RBNZ kept interest rates on hold as expected at the benchmark rate of 1.75% as RBNZ Governor Orr expects to keep their Official cash rate at these levels into 2020. With this news the Kiwi saw a brief rally higher but nothing substantial in a busy 24 hours on the markets. The New Zealand Dollar opens this morning at 0.6660 with most notably United States Final GDP and Core Durable Goods Orders due for release this evening.

GBP / AUD

Expected Range: 1.8000 – 1.8300

The cable touched highs of 1.3162 during European trading following encouraging Brexit-related commentary from the EU’s chief negotiator Michael Barnier. Barnier tweeted that the EU is continuing to work towards an “orderly Brexit” and reinforced that the future partnership with the UK would include a “close economic relationship”. Contrasting this, we also had commentary from Bank of England’s chief economist that Brexit worries are elevated resulting in economic uncertainty.

With no UK macroeconomic datasets released on Thursday, GBP/USD was at the mercy of USD strength following a hawkish assessment of the latest FOMC statement and stronger than expected Q2 GDP growth out of the world’s largest economy. This saw the pound fall to 1.3074 against the greenback during the US session where we have seen some consolidation ahead of Fridays UK Q2 GDP which is expected to show quarterly growth of 0.4%.

On the technical front, immediate GBP/USD support can be seen at 1.3055 and 1.3010 with any topside moves expected to meet resistance at 1.3165.

AUD / USD

Expected Range: 0.7150 – 0.7240

The dollar rose to its highest in more than a week against a basket of major currencies on Thursday, boosted by the Federal Reserve’s outlook for more rate hikes beyond this year as the euro weakened on worries about the Italian budget.

On the data front yesterday we saw the release of U.S. Real gross domestic product (GDP) which confirmed the U.S. economy grew as expected in the second quarter, rising at its quickest rate in nearly four years. US growth was confirmed at an annual rate of 4.2%, according to the final version of Q2 GDP, while for the three months to June, growth was revised to 3.3% from the previous estimate of 3.2%.

Looking ahead today and the US will release August Spending and Incoming data, alongside with monthly Personal Consumption Expenditures (PCE) figures, the Chicago Purchasing Managers' Index (PMI) and the Michigan Consumer Sentiment Index for September.

AUD / EUR

Expected Range: 0.6150 – 0.6220

The Euro was one of the worst performing currencies in overnight trading as a last-minute dispute in Italy undermined the currency. Compounding the declines was the strengthening Greenback which saw a rise across the board. These factors led to the Euro depreciating approximately 0.8% to open this morning at 1.1635.

Italy was again the epicentre of Euro weakness as their two deputy PM’s and the Finance Minister were in dispute over a demand for extra spending and thus the overall size of the fiscal deficit. The Italian cabinet met early this morning and agreed a sharply higher public spending plan, sending the Euro downwards. The issues in Italy tarnished an overwise positive day domestically with the German CPI reading surprising to the upside. The positive reading leaves todays EU CPI reading in much better footing.

Moving into Friday, the Euro turns to a number of CPI readings across the Eurozone with Spain and Italy both releasing figures. The Eurozone as a whole is also due to release CPI figures.

AUD / CAD

Expected Range: 0.9350 – 0.9450

The Canadian Dollar hit its lowest level since September 11th and down 0.2% for the day as continued worries over NAFTA negotiations as the USD/CAD hit 1.3080 overnight. There is still a possibility of a NAFTA deal by this weekend should they come to an agreement by Sunday.

The release of a weak durable goods order and a rally in Oil futures by 0.8% in the United States saw a brief respite for the Loonie trading back to 1.3020 during the local session. the potential that there is still a possibility of a NAFTA deal by this weekend should they come to an agreement by Sunday.

Bank of Canada Governor Stephen Poloz said that the bank will continue to follow a gradual approach to raising rates dependent on how economic data comes to fruition over the coming years and will be closely watching rising inflation levels for the foreseeable future.

Statistics Canada will release GDP figures this evening for the month of July with the potential for a small uptick in growth for the month of 0.1%.