AUD struggles to break above 0.94 ahead of Fed Policy Meeting

Australian Dollar:

The Australian Dollar again offered little to spark the imagination of investors and traded within a 50 point range throughout Monday. With minimal domestic data or macro stimulus available the Aussie touched an intraday high of 0.9416 before moving back below the 0.94 handle. Market reluctance to take the AUD higher has stifled attempts to break resistance levels around 0.9420 as we look to the Federal Reserve Policy meeting commencing this evening and concluding Wednesday for further guidance moving forward.

• We expect a range today between 0.9350 – 0.9420

New Zealand Dollar:

Much likes it antipodean partner the Kiwi remained range bound for much of Monday as escalating tensions in Iraq stifled risk appetite with investors looking to haven assets. Stuck within a 40 point band the NZD oscillated between 0.8660 and 0.8700 as traders searched for a reason to push the unit through resistance at 0.87. The New Zealand Dollar is currently trading at record highs and the market now turns its attention to the US Federal Reserve’s 2 day Policy Meeting concluding Wednesday for further direction and scope to drive the currency higher.

• We expect a range today between 0.8630 – 0.8700 

Great British Pound:

Monday saw the Great British Pound touch 5 year highs moving through 1.70 for the first time since 2009. Speculation the Bank of England will look to raise the benchmark interest rate sooner than initial forward monetary policy guidance intimated has sparked a Sterling rally. The Pound printed its biggest weekly gain in four months last week as investors jumped on comments from Central Bank head Mark Carney wherein it was inferred “borrowing costs may rise sooner than economists expect”. The hawkish rhetoric continued into the new week when Deputy Governor Charlie Bean added fuel to rally suggesting higher rates would be a sign the economy was returning to normal. Bank of England monetary policy has been a driving force behind Sterling direction and this apparent shift in stance and tone has bolstered GBP prospects. Investors will be keenly waiting on MPC meeting minutes due tomorrow and Inflation data today for further bearing.

• We expect a range today between 1.8020 – 1.8120 

Majors:

The Yen touched four month highs against Euro on Monday and moved higher against Greenback as investors sought haven assets. Escalating tensions in Northern Iraq amid concerns surrounding the strength of the US recovery helped drive the JPY rally and USD/JPY moved below 102.00. The US dollar slipped on concerns that rising oil prices and global tensions may force the Federal Reserve to extend its current timeline for monetary policy tightening. With expectations of a rise in benchmark interest rates in 12 months’ time any dovish rhetoric or hint that this may be waylaid will only force the Greenback lower. The Euro found some support as reports from Central bank officials that ECB president Mario Draghi will likely avoid further stimulus packages in the coming months surfaced and the 18 nation bloc unit bounced higher. Investors will be keenly focused on Eurozone inflation numbers next week for further guidance while attentions this week turn to the US Federal Reserve policy meeting commencing today.     

Data releases

• AUD: Monetary Policy Meeting Minutes and New Motor Vehicle Sales m/m
• NZD: No Data
• JPY: No Data
• GBP: CPI y/y, PPI input m/m, RPI y/y, Core CPI y/y, HPI y/y and PPI Output m/m
• EUR: German ZEW Economic Sentiment and Eurozone ZEW Economic Sentiment.
• USD: Building Permits, Core CPI m/m, CPI m/m and Housing Starts.