Volatility ahead as markets await key releases

Australian Dollar:

The Australian dollar has struggled to push forward over the past 24 hours not surprising given the local currency soared by almost 2 US Cents earlier in the week on Tuesday following the RBA’s shift towards a more neutral monetary policy stance. Whilst offshore markets generally favoured a shift back into safe-haven assets the Australian dollar managed to trade 30 basis points either side of the 89 US Cents mark overnight. Whilst opening marginally weaker this morning at a rate of 0.8907 when valued against its US counterpart investors will be looking towards local Trade Balance and Retail Sales numbers today which should provide a supportive base for the dollar if expectations are satisfied. 

• We expect a range today of 0.8870 – 0.8940

New Zealand Dollar:

In line with expectations a report yesterday showed New Zealand’s unemployment rate fell to a three-year low of 6.0 percent in the final quarter of last year. Triggering an immediate rally in the New Zealand dollar which saw it reach an early morning high of 0.8250 when valued against its US Counterpart the strength across the labour market has been led by gains in the retail, accommodation and hospitality sectors. Whilst adding to the evidence of a rebounding economy early gains for the Kiwi weren’t sustained during offshore trade with a mixed US session once again pushing funds back into the world’s safest and deepest pockets. Opening this morning in familiar territory the New Zealand dollar currently buys 82.09 US Cents.

• We expect a range today of 0.8170 – 0.8240

Great British Pound:

In line with a weaker Great British Pound overnight a report showed UK services grew at the slowest pace in seven months in January. With the Services PMI Index dropping to 58.3 in December from 58.8 a month earlier the one positive is that economists view last night’s results as a mere cooling off ahead of any longer lasting slump. Coming off earlier highs of 1.6251 when valued against its US Counterpart the Great British Pound is lower when valued against the Greenback this morning at 1.6310. Ahead of the Bank of England’s interest rate decision tonight the Sterling has advanced against the Aussie (1.8306) and the Kiwi (1.9862) over the past 24 hours.

• We expect a range today of 1.8270 – 1.8340

Majors:

Uncertainty surrounding the global economic outlook continued overnight after a disappointing report showed US companies added only 175 000 payrolls last month as colder than normal weather limited labour market progress. Ahead of the all-important non-farm payroll report due for release on Friday investors are keen to witness improved job creation throughout the world’s largest economy. Offsetting last night’s ADP employment number a separate report showed a gauge of service industries advanced more than forecast.  In currency flows the risk button for investors still remained firmly in the off position with broader flows continuing to favour currencies like the Japanese Yen. As illustrated by the fall in the USD/JPY to a low of 100.793 what may assist in propping up the dollar would be a dovish ECB statement with Policy makers due to meet this evening. Meanwhile this morning the Euro is marginally stronger at a rate of 1.3532.

Data releases

• AUD: Retail Sales m/m, Trade Balance, NAB Quarterly Business Confidence
• NZD: Bank Holiday
• JPY: 30-y Bond Auction
• GBP: Asset Purchase Facility, Official Bank Rate, MPC Rate Statement
• EUR: Minimum Bid Rate, German Factory Orders m/m, French 10-y Bond Auction
• USD: Trade Balance, Unemployment Claims, Prelim nonfarm productivity q/q