USD suffers largest daily sell off in 7 years

AUD / USD

Expected Range: 0.7000 - 0.7250

The Australian dollar offered little to spark investor action throughout the domestic session edging toward the psychological 0.70 handle on mixed macroeconomic indicators. A softer than anticipated trade balance report cancelled out an unexpected advance in building approvals and the AUD touched intraday lows at 0.7002 before an explosive rally in overnight trade saw the Aussie advance nearly 2 cents to touch session highs at 0.7189. The USD tumbled across the board after comments from Fed and FOMC member William Dudley and a weakening across the services sector weighed on the Greenback prompting its largest daily sell off in 7 years. The Aussie found further support as risk on trade kicked in following a 6% advance in oil prices. The rout on the USD help fuel an oil rally after comments from Russia’s Foreign Minister sparked hopes an agreement between the mega producer and OPEC nations to cap oil production could be reached. Having broken key technical resistance points at 0.7172 the AUD is poised to break through 0.72 for the first time since January 5 as attentions turn to the NAB Quarterly Business Confidence report ahead of crucial domestic retail sales data and headline US employment numbers Friday.

NZD / USD

Expected Range: 0.6525 - 0.6750

The New Zealand dollar enjoyed an early rally after the unemployment rate unexpectedly dropped to 5.3% in the 3 months through December. Reports showed there were 16,000 fewer unemployed persons than in September 2015 although a decline in the participation rate dampened any upside rally. Global volatility hampered the currencies advance throughout the domestic session before a mass USD sell off and rally in crude oil prices sparked a run on commodity currencies prompting a near 2 cent Kiwi advance touching intraday and session highs at 0.6697. As attentions turn to critical US employment data Friday the Kiwi looks set to test resistance at 0.67 having already broken barriers at 0.6615 and 0.6678.

GBP / AUD

Expected Range: 2.0250 - 2.0550

The Great British pound rallied through trade on Wednesday enjoying a near 3 cent advance against its US counterpart after softer than anticipated services data and commentary from New York Fed President William Dudley amplified concerns the Fed would need to waylay a secondary interest rate increase. There is an increasing expectation that tighter financial conditions, stagnating global growth and slugging inflation will weigh heavily on the US economy and its domestic growth prospects forcing Fed officials to push back there next rate amendment. Sterling jumped through 1.46 for the first time since January 8th touching intraday highs at 1.4648 ahead of today’s MPC rate statement and monetary policy announcement. Investors will be keenly focused on BoE Governor Carney’s commentary as they weigh and compare global monetary policy outlooks.

USD, EUR, JPY

The USD plummeted across the board through trade on Wednesday all but cancelling out USD/JPY gains earned in the wake of the BoJ move to negative deposit rates while touching 5 month lows against the Euro. Comments from New York Fed President and FOMC member William Dudley weighed on the dollar highlighting market concerns policymakers would need to account for tighter financial conditions, stagnating global growth and slugging inflation prospects before raising interest rates again. As if emphasising Dudley’s rhetoric the US services sector shrunk at a quicker pace than expected through January prompting the largest daily USD sell off in 7 years. The Greenback plunged through 120 JPY before bottoming out at 117 while EUR/USD touched 1.1145, its highest level since October 2015. The expectation that the Fed will need to waylay a secondary interest rate advance is weighing heavily on the Dollar as attentions turn to key labour market data Friday. A softer than anticipated Non-Farm payroll print could all but close the door on a rate increase this year widening the gap between Fed commentary and market expectations. 

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