Daily Forex Commentary

14 December 2016 - Countdown to the U.S Federal Reserve Meeting

By Shameem Musa

New Zealand Dollar:

 

Little changed versus the world’s reserve currency the New Zealand dollar has traded in a fairly tight range over the past 24 hours finding support at 0.7180 whilst running into resistance at 0.7232. Whilst reaching its highest level this year when valued against the Japanese Yen, there has been a general lack of participation during overnight trade ahead of the FOMC’s two day meeting which is expected to show how quickly the Fed intends to raise rates over the next 12 months.  Well supported in most-part however by positive macro flows from China yesterday the New Zealand dollar currently swaps hands at a rate of 0.7204 versus the Greenback.

 

We expect a range today of 0.7170 – 0.7240

 

Australian Dollar:

 

Keeping investors on their toes yesterday markets were greeted with a raft of economic indicators on Tuesday, the first of which revealing softer business conditions domestically. Whilst concerns over a technical recession are lurking in the background solid Chinese industrial production figures and retail sales numbers have steadied a somewhat unstable looking ship. Topping out at an eventual high of 0.7523 when valued against its US Counterpart, the Australian dollar has picked up some margin gains over the past 24 hours, opening fractionally higher at a rate of 0.7501. Whilst this evening remains jam packed with key risk events from the United States, tomorrow’s unemployment read will be also be one to watch.

 

We expect a range today of 0.7470 – 0.7530

 

 

Great British Pound:

 

The Great British Pound enjoyed mixed fortunes through trade on Tuesday advancing to touch intraday highs at 1.2727. Buoyed by an uptick in inflation Sterling found support and looked to cement itself as the best performer across g-10 currencies. CPI and Core CPI inflation data showed price growth accelerated at the fastest pace for more than two years adding to recent improvements across key macroeconomic indicators. Despite low expectations following June’s Brexit vote the U.K economy is largely outperforming analysts’ predictions and has seen the GBP push back recent Greenback rallies. The move however was short lived as profit taking and fears article 50 will be invoked sooner rather than later forced a heavy selloff. Sterling gave up nearly all the day’s gains as key technical moving averages were tested.  Breaking back through 1.27 the Pound open this morning marginally lower and trades at 1.2659 as attentions shift to today’s highly anticipated FOMC and Federal Reserve Policy announcement and Tomorrow BoE monetary policy statement.

 

We expect a range today of 1.7450 - 1.7750

 

Majors:

 

The Greenback traded within a narrow range against the Euro moving between levels of 1.0602 and 1.0667 ahead of tonight’s U.S Federal Reserve Meeting. This is the first meeting since the U.S election and markets have priced in a 95% chance according to the CME Fedwatch Tool of a hike which has resulted in recent USD strength. The accompanying statement by the Fed will be closed watched and a dovish hint may lead to an unwinding of long dollar positions The Fed has indicated that it plans to raise rates gradually in 2017, but this could change once the new administration’s economic policies become clearer. In other news, German ZEW economic sentiment was unchanged in December versus an expected slight increase and U.S Import and export prices fell less than expected in November, both pieces had little impact on the currency pair. Today we see the release of Japan releases the Tankan indices, with both indicators expected to show gains.

 

Data releases:

 

AUD:

WBC-MI Consumer Confidence Dec, ABS New Motor Vehicle Sales Nov

NZD:

Current Account Q3

JPY:

Tankan Manufacturing Index and Tankan Non-Manufacturing Index

GBP:

Jobless Claims 

EUR:

Industrial Production Oct

USD:

Retails Sales Nov, Industrial Productions Nov, FOMC Rate Decision and Statement

 

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