CPI set determine near term AUD direction

AUD / USD

Expected Range: 0.7530 - 0.7690

The Australian dollar edged higher through trade on Tuesday bouncing off supports at 0.7590 as investors adjusted USD holdings on shifting European stimulus expectations. The Aussie benefitted as the Greenback moved off 8 month highs after Bank of England Governor Mark Carney doused suggestions the BoE would lend itself to further easing so soon after its previous rate cut. The comments dampened expectations for an extension in ECB quantitative easing and narrows the perceived gap forming between U.S and European Central Bank monetary policy platforms. The AUD rallied to touch intraday highs at 0.7655 however investors weren’t prepared to extend gains ahead of today’s all important 3rd quarter CPI print. Today’s read has proved a sticky point for currency analyst through the week thus far as a strong read could bolster the near term AUD/USD fortunes, diminishing demand for additional RBA rate cuts and all but guaranteeing interest rate stability through the end of the year. With the Aussie poised to break outside recent ranges we watch support and resistance at 0.7590 and 0.7760 as markers signalling a possible directional swing. 

NZD / USD

Expected Range: 0.7080 - 0.7200

In yesterday’s day of trading, the New Zealand Dollar traded lower against the Australian Dollar on the back of higher iron ore prices which bolstered demand for the Aussie ahead of Australian inflation data today. The NZD/AUD slipped to a 24-hour low of 0.9344 from 0.9381 yesterday, extending its decline for a third day. The Greenback was initially stronger against the New Zealand Dollar in early trade but gave back most of those gains. As a result, the Kiwi was little changed, currently trading at 0.7162 US cents from 0.7148 cents yesterday.

GBP / AUD

Expected Range: 1.5850 - 1.6000

The US Dollar rallied against the Sterling overnight as comments from Bank of England Governor Mark Carney that the recent movements by the Pound would be considered at its next rate setting due to be held on Thursday 3 November. The comments were viewed by the market that interest rates will remain on hold for the foreseeable barring any catastrophic in the markets. The Pound dipped by the 1.22 marked and has remain below this handle for last 12 hours. Tomorrows release of preliminary GDP should also see some volatility in the next day or so. Against the AUD the pound is changing hands at 1.5949 and 1.7015 against the New Zealand Dollar.

USD, EUR, JPY

Continuing expectations that the US Federal Reserve will raise interest rates in the coming months has advanced the US Dollar against most major currencies, Dollar/Yen hit a high of 104.88, the highest we have seen since the end-of-July. On Monday, Chicago Fed President Charles Evans said the Fed could raise rates three times between now and the end of the year as long as the inflation outlook and labour market remain on track.  A move does seems unlikely ahead of the US presidential election with investors pricing in a 71% chance of a hike in December. The Euro remained on the back foot with little reaction to data showing German business confidence hit a two-year high, it seems that any initial concerns over the UK’s decision to the leave the European Union are fading even more. The Euro fell to a low of 1.0852 but managed to recoup all losses to closing a shade under 1.09. Focus now turns today to key data releases starting with Australia’s CPI followed by German Import Prices.