AUD stronger as Business Confidence improves and risk on trade returns

Australian Dollar:

The Australian Dollar continued to rally above 0.87cents and recent lows throughout Tuesday trading as a better than expected NAB Business Confidence report showed improved market confidence. The dollar responded strongly jumping 40 points from 0.8730 to 0.8770 as the positive data flow filtered through. Gains were consolidated as risk on trade returned thanks to an easing emerging market threat and the rally continued through 0.88 reaching intraday highs just above 0.8820 before retracting to open this morning at 0.8771. It seems last week’s strong sell-off may have been overdone and markets are now correcting positions ahead of tonight’s the Federal Open Market Committee and Federal Reserve rate announcements. With little headline data on the domestic economic calendar attentions will most definitely be focused on the US and confirmation of Fed policy as day two of the Central Banks meeting concludes.  

• We expect a range today of 0.8700 – 0.8820

New Zealand Dollar:

The New Zealand dollar remains relatively unchanged as markets are reluctant to proffer any big ticket moves ahead of this evenings US and tomorrows RBNZ Central Bank announcements. With early week volatility, sparked by threatened emerging markets, subsiding expectations of a range bound NZD are likely to hold for much of today with little local news available to sway investor patterns.  

• We expect a range today of 0.8225 – 0.0.8315 

Great British Pound:

The Great British Pound crept lower against its US counterpart throughout trade yesterday despite GDP reports confirming growth levels reached a 6 year high. Preliminary GDP data meet market expectations as fourth quarter growth wrote in a 0.7% q/q increase and 1.9% jump in annualised expansion. The reading highlights the speed of recovery in the UK and coupled with rapidly falling unemployment expectations of a pre-emptive adjustment to the Bank of England cash rate have helped fuel recent Sterling strength. Inflationary concerns have however kept the Pound in check as BoE Governor Carney is expected to clarify forward guidance policy whilst reiterating thresholds are not automatic trigger points but merely a benchmark in assessing economic conditions ahead of any further rate amendments when he hits the wires today. Sterling opens marginally lower against both the AUD and NZD swapping hands 1.8904 and 2.0060 respectively.

• We expect a range today of 1.8800 – 1.9000

Majors:

A mixed session for the Greenback saw the dollar depreciate against most major trading counterparts but gain against Yen and Swiss Franc as risk on trade returned and moves away from safe haven assets took hold. Signs that the turmoil in emerging markets is wanning and improved consumer confidence helped solidify USD/JPY and USD/CHF gains as the Dollar moved above 102.50 Japanese Yen. Furthermore, the impact of weaker than forecast Durable Goods Orders were mostly nullified  as expectations of further reductions in Treasury and Government bond purchases are expected to emerge from  the Federal Reserve’s two day policy meeting concluding today. The Euro came under some selling pressure as suggestions ECB president Mario Draghi may consider purchasing bank loans to help reduce deflationary risk, however as clarification showed this was by no means a firm forward guidance policy and is only intended as a second best alternative should economic stagnation take hold the Euro immediately regained early losses and remains relatively unchanged this morning. The USD opens today at 102.87 and 1.3668 respectively against Yen and Euro. Focus now turns to the FOMC announcement as the big ticket item on Wednesday’s calendar.

Data releases:

• AUD: MI Leading Index m/m      
• NZD: No Data
• JPY: No Data
• GBP: Nationwide HPI m/m and BoE Governor Carney Speaks    
• EUR: GFK German Consumer Climate, M3 Money Supply, Private Loans y/y and German 10y Bond Auction.
• USD: FOMC Statement, Federal Fund Rate and Crude Oil Inventories.