AUD consolidates ahead of CPI and Fed Rate Statement

Australian Dollar:

The Australian dollar has recouped some of the losses suffered into the close of trade last week and in early trade Monday holding above 0.79 throughout Tuesday. A slightly stronger than expected NAB business confidence report helped add some support although offered little to suggest local business expects a significant upswing in market conditions. Softer than expected US durable goods orders helped the Aussie touch session highs of 0.7974 but any significant advance was hampered by falling copper prices as the precious metal neared 5 year lows on the London Metals Exchange. Attentions are keenly focused on today’s fourth quarter CPI report ahead of next week’s RBA meeting for local direction while the FOMC rate statement remains the big ticket item driving investors.

• We expect a range today of 0.7810 – 0.8120

New Zealand Dollar:

With little local macroeconomic data available to steer direction the New Zealand dollar was left to offshore data for guidance.  The Kiwi edged higher through North American trade as US durable goods orders fell 0.6% in December sparking concerns 4th quarter GDP will miss the mark and the US Federal reserve will adopt a cautious stance in light of slackening global growth prospects.  Attentions now turn to both local and international central banks as direction through Wednesday will be driven by the US Federal reserve and its rate statement while Thursday sees the RBNZ convene for the first time in 2015 and investors will look for any changes in monetary policy stance for the year ahead.  

• We expect a range today of 0.7320 – 0.7580

Great British Pound:

Sterling enjoyed a mixed session Tuesday edging lower throughout the domestic trade as fourth quarter GDP data missed the mark. The British economy expanded just 0.5% in the 3 months through December last year just below expectations at 0.6% and dragged annual growth down to 2.7%. Touching session lows of 1.5059 the Pound recovered all losses as a poor US durable goods report sparked fears the Federal Reserve will prolong monetary policy adjustments. Opening this morning at 1.5196 we look to the FOMC and Fed Rate Statement as the primary market event through trade on Wednesday.

• We expect a range today of 1.8950 – 1.9350 

Majors:

The Greenback succumb to profit taking throughout trade on Tuesday as investors looked to lighten their positions in the wake of a poor durable goods order reading. Durable Goods purchases slipped 0.6% in December marking a second consecutive month of contraction and has some investors worried that Friday’s advanced GDP report will also miss the mark threatening expectations of a FOMC and Federal Reserve interest rate hike mid-year. USD losses were somewhat trimmed when consumer confidence report reached 7 year highs  and the FOMC entered day one of its 2 day meeting. The risk for the Greenback and US investors lies in the FOMC’s tone and stance as it addresses markets Wednesday. In light of current global conditions there is every possibility the Fed will err on the side of caution pushing out the timeline and expectations for a June rate hike. With a busy close to the week ahead we first look to the FOMC and its rate statement for direction through trade today with Euro CPI estimates Thursday and a US advanced GDP report Friday as the big ticket items steering direction.   

Data releases

• AUD: MI leading Index m/m, CPI q/q and Trimmed mean CPI q/q
• NZD: No Data
• JPY: No Data   
• GBP: No Data
• EUR: GFK German Consumer Climate, German 30 year Bond Auction and German Import Prices m/m.    
• USD: FOMC Rate Statement, Federal Funds Rate and Crude Oil Inventories