ECB signals more stimulus, greenback softens

Australian Dollar:

The Australian dollar comfortably traded through the 72 US Cents handle on Friday as the Greenback’s gloss started to lose its shine during the back end of last week. Notching up weekly gains in excess of one US Cent the main push to higher ground has come off the back of rising expectations that the cycle towards tighter policy would be a very gradual one, despite a re-iteration from the FOMC that the first lift off date is still likely to be December. In the absence of any risk flare-ups from China, the Aussies value continues to be dictated by underlying interest rate settings as the broad medium-term band of 0.7050 – 0.7250 appears relatively well set. Opening stronger when valued against its US Counterpart at a rate of 0.7234, in the absence of any economic developments today investors will be looking towards a policy speech in Sydney from RBA Governor Glenn Stevens tomorrow.

• We expect a range today of 0.7190 – 0.7260

New Zealand Dollar:

The New Zealand dollar starts the new week marginally higher when valued against its US Counterpart, assisted by a weaker greenback which has softened over the past five days of trade. Appearing somewhat sluggish upon open this morning at a rate of 0.6559, evidence revealed during the release of minutes from the FOMC’s October meeting have prompted bets that future interest rate hikes may occur at a much slower than expected pace. In a week once again set to be dictated by US macro releases investors will need to wait until Thursday for any intraday drivers as broader forex markets continue to experience benign conditions in the lead to what’s likely to be the United States first interest rate hike since 2006

• We expect a range today of 0.6520 – 0.6590

Great British Pound:

The Great British Pound failed to consolidate its upward channel late last week having spent a small portion of time up above the 1.5300 mark when valued against its US Counterpart. Being dragged lower during the back end, opening this morning a rate of 1.5180, signs of a weaker Greenback have failed to reinvigorate the Sterling as investors remain concerned over the BOE’s quarterly inflation report due this week, a report which could reveal a fresh batch of dovish rhetoric in line with the current disinflationary environment.

• We expect a range today of 2.0920 – 2.1050

Majors:

The US dollar fell to a one month low late last week with averages of the currency dropping versus 10 of its major peers. Initially lower following Thursdays FOMC’s minutes, a positive CPI read of 0.3 percent during the month of October on Friday has only offered a minimal level of support. Falling from its highest level in over 12 years, a level only reached a fortnight ago, the US dollar’s trajectory at least in the short-term appears somewhat clouded as it remains difficult to predict specific price moves in the lead to up an event markets last experienced nine years prior. Specifically that is, how much of the expected rate hike come December has already been priced. Jumping across to Europe, in an announcement which has substantially weakened the euro, ECB President Mario Draghi said in a speech on Friday that further action was needed in order to raise inflation. Stating that policy makers must do everything possible in an attempt to raise consumer prices, further monetary easing in response is now expected when the Central Bank meet next month. Whilst the Greenback opens lower so to the does the euro which currently swaps hands a rate of 1.0642, a stone’s throw away from its lowest level in four months.

Data releases

• AUD: No data today
• NZD: No data today  
• JPY: Bank Holiday
• GBP: No data today
• EUR: French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI
• USD: Existing Home Sales, Fed Announcement