Aussie remains range bound

Australian Dollar:

The Australian Dollar opens in familiar territory this morning moving back inside recent ranges having traded within a tight band between 0.9380 - 0.9400 for much of Friday’s session. Escalating conflict in Iraq suppressed demand for higher yielding assets and the AUD failed to offer investors anything that would spark a sustained rally. The domestic docket remains free of headline data today with spotlight directed toward RBA monetary policy minutes Tuesday and the US Federal Reserve policy meeting Wednesday as the catalysts steering weekly direction.

• We expect a range today between 0.9350 – 0.9430

New Zealand Dollar:

In a market where Central Bank policy divergence is gaining momentum as a driver of currency direction the hawkish tone of the RBNZ helped the Kiwi maintain Thursday’s gains and the NZD traded within a tight range above 0.8650 for much of Friday’s session. With a further 50 basis points expected to be added to the official cash rate before year end the New Zealand dollar will more than likely preserve current ranges and demand attention as a higher yielding asset. With little on the domestic docket to begin the week investor focus will be drawn to Wednesday’s US Fed Reserve meeting and Thursday’s 2nd Quarter GDP numbers for further guidance. 

• We expect a range today between 0.8580 0.8690 

Great British Pound:

Sterling rallied across the board last week advancing against 30 of its 31 major currency counterparts as Central Bank policy guidance becomes a major theme. The Pound responded strongly on Friday as investors reacted to comments from Bank of England head Mark Carney wherein the suggestion that a rise in key interest rates may be closer than expected were interred.  The run higher was supported by stronger mid-week data as industrial production and a dip in overall unemployment underlined the strength of the economic recovery. The GBP has now appreciated 9.2% in the last 12 months and is the best performer of 10 developed nation currencies. Attention now shifts to CPI Tuesday and MPC rate announcement Wednesday as markers for further direction.

• We expect a range today between 1.7980 – 1.8080

Majors:

A mixed session saw the Greenback trade within a relatively tight range against most major currency pairs. The University of Michigan reported unexpectedly weak consumer sentiment while a dip in wholesale prices and softer retail sales saw the Dollar drift lower. While investors questioned the strength of the US recovery a safe haven rally took hold as violence in Iraq and escalating conflict triggered a run on higher yielding assets.

Euro pressure continued as the Yen moved to a 4 month high against the 18 nation bloc currency. The Bank of Japan maintained its current monetary stimulus package as expected and the divergence in Central Bank policy triggered a run on the Euro. EUR/JPY is now approaching new lows for the calendar year and attentions will be keenly focused on any further policy guidance from the ECB and BoJ as markers for future direction. With little on the domestic docket today investor attention will largely be drawn to the Federal Reserve Policy Meeting Wednesday as the main macroeconomic driver this week.     

Data releases

• AUD: RBA Assistant Governor Kent Speaks
• NZD: No Data
• JPY: BoJ Monthly Report
• GBP: BoE Quarterly Inflation and Rightmove House Price Index
• EUR: CPI y/y and Core CPI
• USD: Empire State Manufacturing Index, TIC long Term Purchases, Capacity Utilisation Rate, Industrial Production and NAHB Housing Market Index.