Trade Balance data sends Aussie lower

Australian Dollar:

The Australian Dollar opens lower this morning having traded below 0.89 overnight. Yesterday’s Trade Balance data sparked an AUD sell off as a narrowing deficit indicated declining local demand/consumption. Figures revealed modestly lower import numbers and shrinking export demand to China. The Aussie dropped immediately falling from intraday highs above 0.8970 to 0.8930 and became range bound for the remainder of the Australasian session. Stronger than expected U.S trade figures then sent the AUD lower still as the Greenback strengthened across the board before comments from Boston Federal Reserve President Rosengren trimmed U.S advances and the Australian dollar bounced marginally higher to open the day at 0.8916. With little headline data available domestically attention turns to the FOMC minutes released by the U.S Federal Reserve for further direction leading into tomorrow’s Retail Sales.

• We expect a range today of 0.8875 – 0.8975

New Zealand Dollar:

With no local data available yesterday to drive direction the New Zealand Dollar looked to offshore economic stimuli. Having traded within at 50 point range for much of this week the Kiwi remained range bound and once again met resistance at 0.83. The currency was immediately sold off as stronger U.S Trade Balance figures sparked a Greenback rally before comments from Fed member Rosengren capped U.S gains and the Kiwi again made another run at 0.83 before settling lower and opening this morning in the middle of recent ranges at 0.8284. The economic calendar is again absent of local data so attentions turn to US Fed Reserve (FOMC) minutes due during the U.S session today.  

• We expect a range today of 0.8250 – 0.8325

Great British Pound:

The GBP remains little changed this morning as investors consider whether the recovery will continue into 2014. Rallying in early trade on the back of a third consecutive day of increasing U.K Bond sales and a Chamber of Commerce report suggesting strengthening Manufacturing and Services sectors for the short term the Sterling reached intraday highs of 1.6435. Stronger than expected U.S trade figures then sent the Cable lower as Greenback strength permeated across the board before comments from Fed member Rosengren dampened speculation and the Pound now opens in the middle of recent ranges at 1.6403. While opening relatively unchanged against the NZD the GBP is considerably stronger against the Aussie up 1 cent from 1.8290 to open at 1.8390.

• We expect a range today of 1.8350 1.8450

Majors:

The U.S Dollar gained against the majority of trading partners throughout Tuesday as trade balance data revealed a narrowing trade deficit inflating estimates for fourth quarter growth. Figures showed the deficit narrowed to four year lows as exports reached record highs and imports were kept in check by weaker oil prices. The figures signalled that U.S growth may be strengthening and Investors immediately started speculating on revised Fed Tapering time lines. These expectations were immediately put asunder and the Greenback advance cut short as Boston Fed President Eric Rosengren hit the wires commenting “the economy remains vulnerable and while inflation remains too low policy stimulus should be removed only gradually”. The Euro enjoyed a mixed session advancing on the back of stronger German unemployment and retails sales and falling Irish Bond prices. The 17 bloc currency climbed to session highs of 1.3654 before the U.S data strength brought about a correction with the Euro now swapping hands at 1.3615.  Attention now moves to US Fed minutes and the ECB’s monthly rate meeting for further direction.

Data releases

• AUD: AIG Construction Index
• NZD: No Data  
• JPY: No Data
• GBP: BRC Shop Price Index and BoE Credit Conditions Survey 
• EUR: German Trade Balance, Retail Sales, Unemployment, German Factory Orders and Italian Unemployment
• USD: ADP Non-Farm Employment Change, FOMC Minutes, 10yr Bond Auction and Crude Oil Inventories.