Bell FX Currency Outlook: The Australian Dollar is eyeing USD 1.0600 as the grind upwards continues.
Australia. The currency markets showed New Year energy finally with the ECB post-meeting press conference driving a move in most major currency pairs.
The focus is on Japan's breaking off the fire of a stimulus. Japanese 10,000 yen notes are spread out next to U.S. 100 dollar bills at an Interbank Inc. money exchange office in Tokyo, in this September 9, 2010 file photo picture illustration.
The ECB left the stance of policy unchanged but foreign exchange markets latched onto President Draghi's reference to "significant" improvement in financial markets.
Major currencies responded, some breaking recent ranges, which imparted notable weakness to the US Dollar. Our AUD and the NZD posted fresh highs, with both in demand, following yesterday's surprisingly strong Chinese trade data for December.
Today in Asia markets will focus on Chinese prices data for December, with US trade data also expected to be a focal point later tonight. The AUD seems destined to move higher, with it targeting USD 1.0700 as comfortably as Mike Hussey targeted more centuries this summer.
Majors: As mentioned, the focus of markets overnight was on the ECB and President Draghi. The ECB's decision to not cut interest rates was unanimous. As such, a reduction in rates is likely to require a more pervasive weakening in output and a re-emergence of financial market volatility and euro zone stability fears.
This led the EUR to rally one cent against the USD. There were also significant moves on European bond markets, with Spanish 10-year bond yields falling 23bps to 4.87% (lowest since early 2012). Meanwhile, US equities traded solidly but interestingly, European stocks were mixed.
The GBP rallied strongly, assisted by the Bank of England's unchanged policy stance, although this was expected.
The only major pair not to respond to the EUR related move was USD/JPY, which incidentally appears to have made a double-top, suggesting its appreciation is starting to mature.
11 JAN UK Nov Industrial Production
US Dec Import Prices & US Nov Trade Balance
US Dec Federal Budget
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