Concern as Portuguese Bank fails to meet debt obligations

Australian Dollar:

The Australian Dollar shifted downward throughout trade on Thursday as local employment data and Chinese trade numbers missed the mark. According to the Bureau of Statistics the unemployment rate rose to 6% from a revised 5.9% last month and is the highest since July 2003. The poor reading forced the AUD lower before weaker than expected Chinese import numbers compounded matters and drove a deeper selloff sending the currency to an intraday low of 0.9362. Should risk aversion continue to plague markets today following Banco Espirito’s failure to meet its debt repayments we expect the Aussie to remain range bound leading into the weekly close.  

• We expect a range today between 0.9330 – 0.9440

New Zealand Dollar:

With little local data available to stimulate market action the New Zealand dollar looked offshore for direction and stimuli. The Kiwi drifted lower in early trade as Chinese import numbers failed to meet market expectations and the currency dipped below 0.88. Concern surrounding the stability of the European banking system emerged when Banco Espirito, one of Portugal’s largest banks, failed to meet its debt repayments helping the NZD recoup early session losses as investors dumped the Euro and sought safe haven and higher yielding assets. With little local data available today markets are still searching for a catalyst to drive the kiwi higher and through post float highs of 0.8843. We open this morning swapping hands at 0.8814. 

• We expect a range today between 0.8740 – 0.8880 

Great British Pound:

Sterling opens lower this morning having fallen from 24 hour intraday highs around 1.7168. The Bank of England’s Monetary Policy Committee expectedly left rates on holds at 0.5% but failed to spark investor action as the accompanying statement offered little to a market expecting an upbeat and hawkish tone. The MPC cited an inflation rate well inside the Banks 2% target as a primary marker for keeping rates at record lows in the short to medium term. With little available data due today much of the markets focus will be on the Portuguese banking system as concerns surrounding the regions stability increase after Banco Espirito’s failure to meet debt payments.  

• We expect a range today between 1.8180 – 1.8300

Majors:

The U.S Dollar and Japanese Yen closed higher Thursday as investors sort safe haven assets. Market concern rose when Banco Espirito Santo SA, a Portuguese bank, failed to meet its short term debt repayments highlighting the frailty and vulnerability of the region and economic recovery. Risk – off trading took hold as investor’s feared widespread deterioration across other Euro states forcing the 18 nation block currency lower across the board. The banks apparent collapse underlines the ECB’s inability to break the link between sovereignty and the banking system and brings into question their ability to fuel growth in any form. With little headline macroeconomic data on the economic calendar analysts will be keeping a keen eye on unfolding events as we move into the weekend.

Data releases

• AUD: Home Loans m/m
• NZD: FPI (Food Price Index) m/m
• JPY: No Data
• GBP: Construction Output and CB Leading Index m/m