Australian Dollar: As expected the Australian dollar began the day on a stronger note following better than expected Chinese PMI data over the weekend, although this didn't last long as attentions turned to todays big release in the RBA minutes. Retail sales were looked at closely as one of the last pieces of data before this afternoons meeting and they werent pretty, coming in flat with no change compared to expectations for a 0.4% gain. This combined with poor ANZ job numbers has seen expectations for the rate cut continue to mount although there are still those that remain unconvinced, believing the RBA will want to see the inflation data for the quarter before dropping further. With so many pricing the cut in, if they remain on hold we may well see our recent range on the top side taken out. Overnight mixed offshore data kept us between 1.0400 and 1.0450 and we open this morning at 1.0420.
We expect a range today of 1.0375 – 1.0490
New Zealand Dollar: With very little in the way of local data yesterday we saw the Kiwi mostly following the manufacturing data releases over the last 24 hours. The only local data of any note was the terms-of-trade index which fell 3.2% for the month compared to expectations of a fall of 1.5%. This data was quickly shrugged off though as we had Chinese HSBC purchasing manager’s index which came in at 50.5 in November up from 49.5 in October, this continues the positive China manufacturing story started on Saturday and saw us push towards 0.82 during our day. Heading into the North American trade, better than expected European manufacturing data and positive news from Greece took us through 0.8200 before reaching a high above 0.8220. The negative US data may have helped us consolidate this level although with another quiet local day ahead we may find most direction coming from across the Tasman.
We expect a range today of 0.8170 – 0.8245
Great British Pound: The pound had a fairly positive session yesterday breaking above 1.61 for the first time in over a month following strong local manufacturing data while US data disappointed. UK PMI index jumped to 49.1 compared to expectations of 48 and while it is still shows a contraction in the manufacturing sector it is the highest level since August and much stronger than the October number of 47.3. When this number was compared to the US release of 49.5 it was enough to lift the cable above the key 1.61 figure, unfortunately it couldn’t hold and eventually drifted back lower towards the end of the US session as the US fiscal cliff keeps markets subdued and any gains limited. The GBP is also higher against the local crosses with GBP/AUD at 1.5440 and GBP/NZD at 1.9602.
We expect a range today of 1.5390 – 1.5485
Majors: Over the last 24 hours it has generally been a case of manufacturing Monday with most movement coming off the back of releases from China, Europe and the US. The European manufacturing data was by no means outstanding, printing a contraction for the 16th straight month (46.2%) but with declines slowing in Germany, France, Spain, Austria and Greece it was enough to provide support. When you combine this with a Greek offer to buy back 10 billion Euros of their bonds, investors suddenly find themselves without an impending Eurozone negative event to hold back the single currency. This has allowed for positive offshore data to support the Euro above 1.3 eventually reaching a high over 1.0370. Over in the US, the ISM manufacturing index dropped to 49.5 compared to expectations of 51.4, leading to the now daily tune of ‘fiscal cliff’ being brought back into the picture. The number was the worst print since 2009 and with China and Europe both reporting better than expected numbers we saw the USD fall further against most of its major counterparts with USD/JPY pushing towards 82.
AUD: RBA rate decision, Current account balance, Building approvals
NZD: No data today
JPY: Labor cash earnings, Monetary base
GBP: PMI construction
EUR: Eurozone PPI
USD: ISM New York