Daily Forex Commentary

13 December 2016 - U.S Dollar slips as Fed meeting in focus

By Shameem Musa

New Zealand Dollar:


The New Zealand dollar edged higher throughout trade on Monday, buoyed by rising commodity prices and profit taking ahead of the Federal Reserve’s much anticipated monetary policy announcement. Crude oil prices rallied, dragging with it commodity linked currencies after Opec and non-Opec oil producers agreed to cut output throughout 2017. The NZD advanced some 80 points moving through technical barriers at 0.72 and touching intraday highs at 0.7207 before selling pressures forced the Kiwi lower. With attentions now squarely focused on the FOMC and Federal Reserve there is a nervousness surrounding recent Greenback strength and its impact on future monetary policy. The rapid appreciation in the U.S dollar could promote a sense of unease within the Fed and prompt a cautious approach to future rate adjustments. With 0.72 firming as key point of resistance markets will be closely attuned to tomorrow’s FOMC commentary and references to the pace of future interest rate hikes.


We expect a range today of 0.7060 – 0.7240


Australian Dollar:


In what has become a familiar trend for the Australian dollar over the past week of trade, the domestic unit once ran into some stiff resistance at the 75 US Cents mark on Monday. Ranging between a low of 0.7428 and a high of 0.7507, a surprise oil production cap which spurred heightened demand for energy and mining stocks has to date failed to stimulate a more prolonged rally for the AUD. Ahead of Wednesday night’s FOMC meeting investors will firstly need to digest Asset Investment and Industrial Production numbers from China today. Opening in a stronger position the Australian dollar currently buys 74.90 US Cents. 


We expect a range today of 0.7450 – 0.7530



Great British Pound:


The Great British Pound has started the week in fine fashion to test Thursday’s highs of 1.27 in overnight trading. Opening the week at 1.2560 against the Greenback, the Sterling was one of the best performers as the market positions itself ahead of a busy docket this week in the UK. Starting off with this evening’s release of UK annualised inflation figures with an expected higher CPI reading 1.1%. This could potentially see the Monetary Policy Committee move away from their easing cycle as inflationary pressures start to rear its head. In the short term though there is still concerns over the uncertainty of Brexit and it is expected that interest rates will be kept on hold at Thursdays Bank of England Policy Meeting.


We expect a range today of 1.7550 - 1.7700




After touching a one week low against the US Dollar last week on the back of ECB announcement the Euro gained momentum and firmed against the Greenbank hitting a high of 1.0652 overnight. The rise was thanks mainly to a jump in oil prices as investors took the view that higher oil prices will help reflate the euro-zone economy. Meanwhile in Japan data released showed Japan’s October core Machinery order rose for the first time in three months, beating expectations and an encouraging sign for capital spending. USD/JPY briefly pushed above the 116 level, the first time since early February. No major economic data was released out the U.S, markets await the Fed’s interest rate decision due out later this week.



Data releases:



Nab Business Confidence


Manufacturing Sales, Food Prices


No data


CPI Nov, PPI Output Nov, House Price Index  


Employment Change q/q, German ZEW Economic Statement


Import Prices m/m


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