All eyes on the ECB

Australian Dollar:

The Australian dollar has once again failed to establish itself and solidify gains when valued up above the 82 US Cents mark, a precedent which was maintained during overnight trade. Sold aggressively having earlier reached a high of 0.8232 the higher yielding asset plummeted following reports that the ECB will boost stimulus through asset purchases worth up to 50 Billion euros a month through to 2016. In what’s likely to be a bumpy ride given investors have already been speculating over potential outcomes for months, this evening’s final policy statement is expected to provide a definitive answer over the size of the ECB”s balance sheet expansion. In what’s been a torrid overnight session for the Aussie, this morning we open notably lower at a rate of 0.8090.

• We expect a range today of 0.8050 – 0.8150

New Zealand Dollar:

The New Zealand dollar has been broadly sold over the past 24 hours following a report which showed inflation fell by a surprising 0.2 percent in the December quarter of last year. With the annual rate of inflation falling to 0.8 percent, a level well below the Reserve’s Bank annual targeted band of 1 to 3 percent, expectations surrounding future interest rate rises have now shifted significantly. Falling from an opening level of 0.7636 when valued against its US Counterpart the New Zealand dollar is 0.6 percent lower as it currently swaps hands at rate of 0.7563.  

• We expect a range today of 0.7520 - 0.7600

Great British Pound:

The first unanimous decision since July by the Monetary Policy Committee to keep interest rates on hold has lowered the outlook for future rises given also the backdrop of weak inflationary pressures and plunging oil prices. Falling against 13 of its 16 major peers the Great British Pound has struggled to garnish a great deal of support following the announcement which now sees all seven policy makers sitting in the dovish boat. Opening lower against the Greenback this morning at a rate of 1.5124 the Sterling is stronger also against a notably weaker Australian (1.8687) and New Zealand dollar (1.9986).We expect a range today of 1.8640 – 1.8730

Majors:

Whilst the plan still faces a stern battle to ensure it’s passed by the Governing Council reports have surfaced overnight that ECB President Mario Draghi is calling on his committee members to approve and unleash a debt buying spree to the value of 1.1 trillion euros. Suggesting that a fed-style quantitative easing program would be in the vicinity of 50 billion euro per month. Given markets are expecting the precise style and structure of the stimulus program to be unveiled this evening there remains little doubt that an expansive and aggressive policy response is necessary to ensure deflationary fears are dealt with once and for all. For the time being steady against the greenback at 1.1588 the 18-nation currency is expected to remain vulnerable over the coming 24 hour window. Outside of ECB happenings markets will also be keeping a close on Chinese manufacturing results expected for release tomorrow.

Data releases

• AUD: MI Inflation Expectations
• NZD: Business NZ Manufacturing Index
• JPY: No data today
• GBP: MPC Member Miles Speaks, Public Sector Net Borrowing, CBI Industrial Order Expectations
• EUR: Minimum bid rate, ECB Press Conference
• USD: Unemployment Claims