China cuts rates as Aussie rallies late

Australian Dollar:

The Australian dollar ended the week stronger against the Greenback on Friday as China reduced rates for the first time since 2012. In an unexpected move the world’s second largest economy and Australia’s largest trading partner lowered the cash rate after the powerhouse nation was due to record its weakest annual growth in nearly 25 years. The move to aggressive monetary easing saw the Australian dollar rally fast climbing nearly a percent as global stock and commodity prices jumped higher. Falling iron ore prices have been a concern for onlookers as the recent sharp drop has hurt the Australian dollar and put a drag on future prospects of economic growth. This morning the AUD opens stronger against the US dollar at 0.8669 and with no data locally for direction investors will look offshore for guidance.

• We expect a range today of 0.8630 – 0.8710

New Zealand Dollar:

The New Zealand dollar received some much needed offshore help late on Friday rallying above the daily open to end a recent run where the higher yielding currency has trailed off against the US dollar. Dairy prices fell to the lowest level in five years last week weighing in on prospects of future economic growth however China’s unexpected decision to cut rates helped the NZ dollar reclaim some ground. The move to lower the cash rate saw commodity prices jump higher and was taken as a big boost to the exporting nation. The NZ dollar opens this morning above Fridays open at 0.7879 as onlookers turn to visitor arrivals early on Monday for direction.

• We expect a range today of 0.7840 – 0.7920

Great British Pound:

The British Pound lost ground to the US dollar on Friday ending the week lower after EcB president Mario Draghi’s comments weighed in and China cut rates unexpectedly. Investors looked to the safe haven Greenback after dovish comments from Europe in the wake of concerns over continuing low inflation. Cable dropped over half a per cent to open this morning at 1.5653 and similarly lost ground against the higher yielding currencies. The Aussie(1.8032) and Kiwi(1.9840) rallied immediately after China’s move to monetary easing.  Looking to the week ahead with no heavy impacting data to provide direction today investors will have to wait on Tuesday’s comments from Bank of England’s Governor Carney for direction. 

• We expect a range today of 1.7990 – 1.8070

Majors:

The Euro ended the week trading sharply lower against most major currencies after comments from European Central Bank president Mario Draghi once again stressed authorities would do what was needed to boost the economy in the Eurozone. Onlookers interpreted a sign for further stimulus programs are be close to being introduced as Draghi reiterated the EcB would move rapidly if economic growth continued to struggle. The Euro opens this morning at 1.2366 nearly 2 cents lower than Friday and investors will pay close attention to weekly data releases beginning with German Ifo business climate for direction and clues to the EcB’s next move. 

Data releases: 

• AUD: No Data
• NZD: Visitor Arrivals m/m
• JPY: Bank Holiday
• GBP: Nationwide HPI m/m
• EUR: German Import Prices m/m, German Ifo Business Climate, Belgium NBB Business Climate
• USD: Flash Services PMI