Daily Forex Forecast 12/12/2012

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Australian Dollar: It was a lacklustre session domestically for the Australian dollar yesterday which remained firm in the face of a business confidence survey which plummeted to its lowest level since April 2009. Despite its sluggish start the Aussie came to life as North Americans markets entered the frame surging to a high of 1.0531 against its US Counterpart. Whilst German investor sentiment topped a seven month high ongoing speculation that the US Federal Reserve will add to its existing US$40 billion worth of bond purchases has also had a profound impact on the strength of the Australian dollar. With The Fed’s two day meeting due to commence this evening any further loosening of monetary policy should initially weaken the Greenback essentially doing the Aussie even more favours. Meanwhile this morning the Australian dollar has finally cracked the critical the 1.05 mark opening stronger at 1.0516.

We expect a range today of 1.0480 – 1.0530

New Zealand Dollar It what was a very positive session for the New Zealand dollar yesterday the Kiwi rose to a nine-month high against its US Counterpart. Driving the higher-yielding asset towards a peak of 0.8391 an improved consumer sentiment survey out of Germany, Europe’s flagship economy, has lifted hopes they will be able to avoid a recession. With hopes also rising that US Federal Reserve will roll out further stimulus such moves should be supportive of an even further strengthening in the New Zealand dollar. This morning the Kiwi currently buys 83.78 US Cents.

We expect a range today of 0.8350 – 0.8400

Great British Pound: Whilst global equities and a handful of major currencies all pointed higher yesterday the story was no different for the Great British Pound which enjoyed a solid advance against its US Counterpart. Well supported by improved risk flows and sentiment from broader Europe, talks of further US Federal Reserve stimulus have also played its part. After touching lows of 1.6067 the Sterling opens this morning notably higher at a rate 1.6108. Meanwhile on the cross-rates the Sterling has struggled to keep pace with the Aussie (1.9315) and the Kiwi (1.9222) which both open weaker this morning

We expect a range today of 1.5280 – 1.5340

Majors: European stocks advanced to an 18-month high yesterday after German investor confidence surprisingly jumped in December. Further helping the cause of the shared unit overnight there has been some renewed optimism that Greece has been successful in drawing enough bonds to its sovereign debt buyback to ensure further aid requirements are unlocked by the IMF and EU. With Spanish borrowing costs falling and concerns over political instability in Italy also waning the Euro rallied yesterday and after trading between a range of (1.2927 – 1.3013) against its US Counterpart it opens stronger this morning at a rate of 1.3002. Jumping across to the US where speculation continues to mount that the US Federal Reserve will add to its monthly bond purchases of $US40 billion further stimulus is likely to weaken the Greenback at least in the short-term. With the two day Fed meeting set to dominate headlines over the coming 48 hours it remains to be seen whether further stimulus would in fact have a profound influence on the underlying level of growth given the reduced flow-on effects seen over four years of sustained added liquidity.

Data releases

AUD: Westpac consumer sentiment, RBA Gov Stevens Speaks

NZD: No data today

JPY: Core machinery orders m/m, Tertiary Industry Activity m/m

GBP: Claimant Count Change, Unemployment rate, MPC member Dale speaks

EUR: ECOFIN Meeting, Industrial Production m/m

USD: Import prices m/m, FOMC Statement, Federal Funds Rate, FOMC economic projections, FOMC press conference

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