Daily Forex Commentary

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Friday, 27 January 2012 - Market Commentary

By Carly Pickering

Australian Dollar

With most of the country focused on lighting the BBQ and chilling the beer, the Aussie dollar had a relaxing Australia Day, for its onshore session at least. Moving marginally higher from its opening levels, it trading across to London hours just above 1.0600 before an announcement from Russia’s central bank broke the Aussie from its range. Deputy Chairman Alexei Ulyukayev indicated the Bank of Russia may start to buy the Australian Dollar as an international reserve currency as soon as February this year. Pushing the Aussie to nearly 3-month highs above 1.0670 was this news in combination with Federal Reserve policy to keep US interest rates at record lows through until at least late 2014. Profit-taking of long positions has seen the local unit fall back slightly to start the Asian session at 1.0620.

We expect a range today of 1.0580 – 1.0670

 

New Zealand Dollar

The New Zealand Dollar has risen against the Greenback overnight, as a pledge to keep US interest rates suppressed until 2014 weakens the mighty dollar. For a currency that derives a lot of its strength from interest rate yields, this increased differential sent the Kiwi to highs above 0.8220 and nearly 3 month highs helped by the decision from its own local central bank to keep interest rates on hold at 2.5%. With Australia Day in full swing across the Tasman, the antipodean pair remain in quiet trade for the full 24 hour period, opening this morning at 1.2960 (0.7716) ahead of Kiwi trade balance figures due for release this morning. The NZD/USD has consolidated lower to 0.8190.

We expect a range today of 0.8150 – 0.8240

 

Great British Pound

Retail Sales in the United Kingdom have suffered their biggest fall in 3 years with 44% of retailers reporting sales volumes fell on a year ago, while 22% reported a rise, giving a balance of -22%. With this disappointing data following news on Wednesday that the economy contracted 0.2% in the final quarter of last year, Sterling fell against most of its major trading partners. Falling to lows near 1.1915 against the Euro, 1.4690 against the Aussie and 1.9060 against the Kiwi these positions have recovered slightly into today’s trade. Against the Greenback however, worrying fundamentals from the UK have been outweighed by a Federal Reserve pledge to keep US interest rates at benchmark lows for longer than originally intended. This leaves Cable trading this morning at 1.5690.

We expect a range today of 1.4690 – 1.4820

 

Majors

The Greenback opens weaker against all of it major trading partners this morning after the US Federal Reserve pledged to keep its interest rates at record lows for longer than they had originally forecast. Announcing rates would now remain at current levels through to late 2014 rather than mid 2013 sent ripples through the market, as investors were taken by surprise. The Euro rallied to five-week highs against the US Dollar, hitting levels above 1.3170, and the Japanese Yen pushed to 77.30 as speculation of further quantitative easing followed the announcement. Further quantitative easing would effectively de-base the Greenback by injecting greater amounts of cash into the economy. The Euro has pared most of these gains by this morning’s open as talk with private sector bond holders drag on in Greece and markets become increasingly impatient for a solution. The Dollar Yen pair has since consolidated just below the 77.50 handle.

 

Data releases:

AUD: No data due for release

NZD: Trade Balance

JPY: Tokyo Core CPI y/y; Monetary Policy Meeting Minutes; Retail Sales y/y

GBP: No data due for release

EUR: M3 Money Supply y/y;

USD: Advance GDP q/q; Revised UoM Consumer Sentiment; Revised UoM Inflation Expectations

 

 

 

 

 

 

 

 

 

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