Australian Dollar: A strong turnaround in a report on business confidence yesterday has seen the Aussie rebound off recent lows and we now find it back around 1.0465. The NAB monthly report into Australian business confidence came in at 3 for December compared to -9 in November which was the biggest improvement since October 2001, which saw an immediate rally in AUD/USD towards 1.0450. Earlier in the day it looked like we were heading back below 1.04, but this positive release combined with a weakening USD looks to have provided support to keep us within the 1.04 to 1.05 range for the short term. Overnight some better than expected US corporate earnings and some mixed US and European data has seen the Aussie and its fellow commodity currencies reverse the losses they have seen against the USD since Thursday last week. With only minor data out today it looks to be a fairly quiet session for financial markets, but tonight we have US GDP taking much of the focus before the Fed’s announcement tomorrow morning.
We expect a range today of 1.0415– 1.0495
New Zealand Dollar: Yesterday saw the Kiwi continue its recovery from earlier lows of 0.8280 to eventually run into resistance around 0.8380. A weakening USD combined with better than expected local trade balance data has seen the Kiwi’s weakness limited to a two day period and we now look likely to move back above 0.84 with further weakness in the USD likely as we approach the US Fed’s rate and stimulus decision. Locally yesterday the trade balance data showed a 486m surplus in December compared to expectations of a 105m deficit which was the largest surplus in 12 years and with the RBNZ due to meet tomorrow morning this just adds to the market’s pricing of an almost certain hold on interest rates. The accompanying statement tomorrow will be of more interest, in particular what the central bank sees in the recent inflation numbers and the strong NZD. This morning we find the NZD currently trading just below 0.8380 against its US counterpart.
We expect a range today of 0.8350 – 0.8425
Great British Pound: A weakening USD has seen the pound recover, perhaps only temporarily, back up to 1.5760. After reaching a 5 month low yesterday around 1.5680, the pound managed to find support after a member of the Bank of England talked up the prospects of an improving UK economy over the next 18 months. David Miles was commenting on recent views that the UK economy will eventually settle to long term growth levels below 2%, however he forecasts that once things do begin to improve (in around 18 months) the previous growth averages should return. The comments weren’t really anything to bank on and the improvement in the pound would have been more due to both the weakening USD following mixed US data and some profit taking on built up short positions. This morning the pound is currently at 1.5760 against USD and 1.5050 against the Aussie while things are little changed against NZD, currently at 1.8790.
We expect a range today of 1.5020– 1.5090
Majors: Some mixed data releases overnight has led to USD pairing back some of its recent gains while the Euro has continued its recent strength breaking through a key resistance level and sitting just shy of 1.35. The past few sessions have seen EUR/USD attempt to break through a key level around 1.3485 but each time it has struggled, last night however, after continued positive corporate earnings reports and German consumer confidence data, the shared currency broke new ground and is now close to an 11 month high. This corporate earnings season in the US has been quite positive which has seen more risk appetite feeding through, and with a report on US house prices coming in better than expected overnight the markets seem to have ignored some other rather disappointing US consumer confidence data. The conference board consumer confidence report came in at 58.6 compared to expectations of 64.0 and well below the previous month’s reading of 66.7; which would have normally seen a fall in risk appetite and a strengthening USD, but it appears investors are being selective and preferring to align positions more to USD weakness as we get closer to the Fed’s rate and stimulus decision. The Fed’s two day meeting started last night but their announcement comes through early tomorrow morning, between now and then we also have US GDP to look forward to along with Eurozone consumer confidence. This morning we find EUR/USD still strong at 1.3496 and USD/JPY fairly flat at 90.80.
AUD: Internet skilled vacancies
NZD: Building permits
JPY: Retail trade
GBP: Consumer credit, Net lending, Mortgage approvals
EUR: Eurozone consumer confidence,
USD: GDP, FOMC rate decision, Personal consumption