Investors short USD on back of softer macroeconomic indicators

Australian Dollar:

The Australian Dollar offered little to excite investors in what can only be described as a lacklustre domestic trading session dampened by declining consumer optimism. The AUD edged lower relinquishing the 0.76 handle and touching intraday lows of 0.7573 before rallying strongly on the back of another poor US economic data print. Advancing 100 pips throughout the North American session the Aussie followed a basket of counterparts higher before running out of steam on approaches to 0.77. Attentions now turn to today’s key unemployment rate and employment report with analysts expecting the labour pool to add another 15,000 new jobs. The importance of this month’s read is amplified by the divergence in business and consumer optimism. Tuesday’s Nab business confidence report purported improving business conditions while yesterday’s Westpac consumer sentiment account showed a declining optimism. A strong read could help push the AUD through key technical resistance levels and break above the 0.77 handle.

• We expect a range today of 0.7530 - 0.7750

New Zealand Dollar:

The New Zealand Dollar rallied strongly throughout the North American trading session Wednesday buoyed by softer than anticipated US manufacturing production and industrial output. The Kiwi rallied to touch intraday highs of 0.7612 before retreating to open this morning at 0.7586. The domestic economic docket is again free of headline data and direction will derive from key US employment numbers and Building permits. Attentions will be keenly focused on Australian employment data with a poor read prompting the possibility of a run to parity.

• We expect a range today of 0.7490 – 0.7680

Great British Pound:

Sterling was just one of a basket of currencies that enjoyed a spout of upward momentum Wednesday as investors looked to short USD positions on the back of another soft macroeconomic data print. With little domestic indicators on hand to drive direction Cable was buoyed by weaker than anticipated U.S manufacturing and industrial output jumping to intraday highs of 1.4853 before settling and closing the day buying 1.4828. Attentions now turn a heavy US docket for direction through trade on Thursday before turning to Friday’s employment report for guidance into the weekend.   

• We expect a range today of 1.9110 – 1.9510

Majors:

The U.S. Dollar retreated against a basket of major currency pairs as softer than anticipated Macroeconomic data forced markets to re-evaluate long positions.  Industrial output posted its biggest monthly decline in more than two and a half years while New York’s Empire State Manufacturing index dropped steeply and the Capacity Utilisation rate edged lower. The weaker data highlights the dampening influence of the higher USD on the domestic economy and raised concerns the Fed will be forced to extend is accommodative monetary policy program into the 3rd and 4th quarters of 2015. Markets have become increasingly sensitive to US data flows as they seek guidance on macroeconomic performance and indicators that may bolster the prospects of a US rate adjustment. Such is the attention on Fed outlook the ECB’s press conference was largely glossed over as investors offered a muted response to the maintenance of the Central Banks dovish stance. The Euro touched highs of 1.0702 intraday however concerns surrounding Greece’s ability to meet reform requirements in time to obtain its next tranche of troika assistance continue to escalate and will cap an significant advance. Attentions now turn US employment data, Philadelphia manufacturing stats and Building permits for a deeper insight into economic performance.

Data releases:

• AUD: MI Inflation Expectations, Employment Change, Unemployment Rate and New Motor Vehicle Sales.
• NZD: Business NZ Manufacturing Index
• JPY: No Data
• GBP: RICS House Price Balance
• EUR: Italian Trade Balance and Spanish 10 Year Bond Auction
• USD: Building Permits, Unemployment Claims, Housing Starts, Philly Fed Manufacturing Index and FOMC Members Lockhart and Fischer speak.