Recent pressures on the Australian dollar have been momentarily forgotten over the past 24 hours and the local unit sits 0.9% higher against the Greenback this morning. Local unemployment figures caused an initial lift off yesterday’s lows near 1.0180 and despite a lower participation rate in the workforce, markets appeared appeased by a 0.1% drop in the overall unemployment rate to 5.1%. Moving into European hours around the 1.0230 mark, confirmation of a European bond-purchasing plan by the ECB sparked a relief rally that took the risk sensitive Aussie dollar to highs near 1.0300, although the barrier could not be broken. Sitting at 1.0280 this morning local trade data will be in focus this, and with recent concerns over a Chinese slowdown, export numbers will no doubt be under scrutiny.
China, and the Euro-zone's GDP growth forecasts have been reduced to 8.2% (prior +8.5%) and -0.1% (prior 0.2%) respectively; whereas Germany, France and the US results were amended upwards.
We expect a range today of 1.0220 – 1.0320
New Zealand Dollar
Relief in the markets over confirmation of European Central Bank action has helped the New Zealand dollar break through 80 cents overnight, a level it hasn’t traded above since Monday. The risk switch has been flicked on, and along with a firming in commodity prices, the Kiwi touched highs near 0.8030 before settling to open this morning around 0.8015. Direction for the local unit is set to be derived from risk appetite into the end of the week, as last night’s announcement is digested by the markets and tonight’s US employment data is released. The New Zealand dollar’s correlation to risk has also afforded a gain against the Euro to trade near 0.6350; falling ever so slightly against the Aussie the pair trade at 1.2830 (0.7794).
We expect a range today of 0.7960 – 0.8050
Great British Pound
Somewhere in the whirlwind of ECB anticipation, the Bank of England’s Monetary Policy Committee were meeting to set the UK’s own policy for the next month. Leaving both interest rates and their asset purchasing facility on hold, the nation seems to be gradually making its way out of recession as policy stands; stimulus offered by the ECB could also contribute positively to the UK economy as the benefits slowly start to seep through. Cable rallied to touch a high of 1.5940 as markets digested the news and risk sentiment improved across the markets; struggling against the risk-correlated Aussie and Kiwi dollars, Sterling is trading lower at 1.5490 and 1.9875 respectively.
We expect a range today of 1.5410 – 1.5560
The euro has touched 2mth highs overnight as ECB President Mario Draghi backed up recent claims of a central bank bond-purchasing plan. Nick-named ‘OMT’, or ‘outright monetary transactions’ the program will involve the ECB purchasing short-dates securities in the secondary market, only after governments had requested primary market intervention from the European bailout funds. The initial relief caused EUR/USD to rally to highs of 1.2650, and despite a quick move back below 1.2600 on a downgrade in forecasted European economic growth, the pair finds themselves back at 1.2630 this morning. EUR/JPY reflected the positive news for the euro-zone as well, the pair moving back towards 100.00 and etching two-month highs just below 99.80. Although slightly overshadowed by events in Europe, ADP employment figures were also released last night from the United States and despite a reading above 200,000 for the privately conducted survey, markets are still nervous tonight’s key NFP figure will be a little softer. The Greenback opens this morning stronger against its Japanese counterpart however, as this data and an expansion in the services sector supported a rally back toward 79.00.
NZD: No data due for release
JPY: Leading Economic Index
GBP: Manufacturing Production; PPI Input; Consumer Inflation Expectations; Industrial Production
EUR: German Industrial Production m/m
USD: Non-Farm Employment Change; Unemployment Rate; Average Hourly Earnings m/m