Aussie tumbles on US FOMC meeting

Australian Dollar:

The Australian dollar continued through the majority of Wednesday’s Asian trade drifting sideways barely moving from the daily open of 0.8214. As the day progressed the higher yielding currency was hit with heavy selling pressure falling as low as 0.8138 with riskier assets being sold off across the board. Overnight the Aussie marginally recovered after poor US CPI inflation data however once the US Federal Reserve indicated the time frame to an interest rate increase could be as early as mid-next year the AUD dropped to 0.8110. The AUD opens this morning nearly a cent weaker in a territory not seen in over 4 years. Today’s RBA bulletin should have a fairly light impact however overnight US numbers will provide the majority of direction for investors.

• We expect a range today of 0.8100 – 0.8180

New Zealand Dollar:

The New Zealand dollar fell under immense selling pressure as risk appetite disappeared from the market during Asian trade late on Wednesday. A Positive current account could not soften the Kiwi’s fall as the higher yielding currency lost nearly half a cent unexpectedly. Overnight the NZD regained some ground after inflation numbers from the US missed the mark. However an indication that interest rates in the United States could be raised as early as mid-next year saw the Greenback strengthen and the NZ dollar dropped to 0.7689. The Kiwi opens this morning at 0.7720 with investors to watch domestic GDP figures closely as they will give direction for the remainder of today’s trade. 

• We expect a range today of 0.7680 – 0.7760

Great British Pound:

The British Pound slid against the Greenback on Wednesday as strong domestic data could not cushion the Sterling’s fall. Claimant Count Change came in ahead of forecast and the average earnings index showed an unexpected increase, however investors were waiting on the US Fed announcement for direction. Cable fell by 150 points as the US Fed indicated the time frame to an interest rate increase could be as early as mid-next year, opening this morning substantially weaker at 1.5562. In a similar however not as dramatic move the GBP lost ground against the higher yielding AUD(1.9139) and NZD(2.0188) with all eyes now on domestic retail sales numbers for direction released later tonight.

• We expect a range today of 1.9120 – 1.9200

Majors:

The Euro was hit hard overnight losing over 150 points to its US counterpart as the US Federal Reserve took centre stage. The Inflationary figures out of Europe came in on forecast and the high impact nature of the US data being released shortly after left investors sitting on the fence waiting for guidance. The US Federal Reserve changed the language in their release, dropping the words “considerable time” and indicating the middle of next year as the time frame to an interest rate increase. The Fed mentioned they are pleased with how the US economy is progressing however inflation is still below the target 2 per cent band and there was room for further improvement. Tonight all eyes will continue to watch the US data releases with unemployment claims and manufacturing numbers to provide direction.

Data releases:

• AUD: RBA Bulletin
• NZD: GDP q/q
• JPY: No Data
• GBP: Retail Sales m/m
• EUR: German Ifo Business Climate, EU Economic Summit, Spanish 10-y Bond Auction
• USD: Unemployment Claims, Flash Services PMI, Philly Fed Manufacturing Index, CB Leading Index m/m, Natural Gas Storage