AUD briefly touches 5-week high

Australian Dollar:

Yesterday marked exactly one year since the Australian dollar last traded at parity against the US dollar with the higher yielding asset pushing to a late afternoon peak of 0.9408. In a move which came unexpectedly levels in excess of 94 US Cents have not been seen for more than five weeks. Whilst the dollar has done exceptionally well to absorb weak data flows from China this week as well as a tough budget release on Tuesday the quick bout of buying yesterday has been attributed to speculation the RBA will start to raise later this year amid a handful of larger Central Bank’s globally who continue to push back expectations surrounding future rate rises. With the move to higher ground a relatively short-lived one the Aussie is still in a stronger position this morning as it buys 93.78 US Cents.

• We expect a range today of 0.9340 – 0.9410

New Zealand Dollar

The New Zealand dollar has encountered a busy 24 hour window doing well to shrug off an early disappointment which came in the form of Retail Sales for April. With retail growth coming in at 0.7 percent versus the consensus of 0.9 percent the dovish mood didn’t last long after RBNZ Governor Graeme Wheeler announced that it could remove the high loan-to-value-ratio mortgage lending as early as late 2014. With house sales having slumped 11 percent between October and March many have hinted that the Central’s Bank attempts to curve house prices have been almost too successful. Whilst also signalling further rate rises from 3 percent later this year overall the influence on the New Zealand dollar following the Financial Stability Report was positive as the Kiwi reached a high of 0.8677. Stronger this morning the Kiwi currently buys 86.67 US Cents

• We expect a range today of 0.8630 – 0.8690

Great British Pound:

The Great British Pound opens this morning broadly weaker against a handful of its major peers after Bank of England Governor Mark Carney signalled that officials are prepared to wait until next year before they raise interest rates. Discussing the fact that excess capacity still exists Carney stated the exact timing of higher rates will depend upon the evolution of the broader economy. With the key interest rate now set to remain at a record low of 0.5 percent for the foreseeable future the Sterling slumped from an earlier high of 1.6873 down to a low of 1.6752 when valued against its US Counterpart. Weaker against just about everything the Great British Pound is lower against the Greenback (1.6766), the Aussie (1.7877) and the Kiwi (1.9363)

• We expect a range today of 1.7830 – 1.7920

Majors:

Currency markets have been subdued over the past 24 hours with the Euro in particular stopping to catch its breath having lost over 3 US Cents since last Thursday when ECB President Mario Draghi signalled his intention to cut rates in June. Having signalled that Policy makers are comfortable with taking action next month, such signals may well be justified this evening as investors cast their eye’s over European Inflation numbers expected to show prices rose by a mere 0.7 percent on an annualised basis. In addition to tonight’s inflation read growth numbers from France and Germany are also shaping as critical indicators as the Euro opens marginally stronger at 1.3713 when valued against its US Counterpart. In other notables overnight the Japanese Yen advanced against Greenback, stronger at 101.861 after Ratings Agency Fitch confirmed their A+/neg outlook for Japan based on debt stabilization.   

Data releases

• AUD: New Motor Vehicle Sales m/m
• NZD: Annual Budget Release
• JPY: BOJ Gov Kuroda Speaks
• GBP: No data today  
• EUR: ECB Monthly Bulletin, Italian Prelim GDP q/q, CPI y/y, Core CPI y/y, Flash GDP q/q
• USD: Core CPI m/m, Unemployment Claims, CPI m/m, Empire State Manufacturing Index, TIC long-term purchases, Capacity Utilization Rate, Industrial Production m/m