Daily Forex Commentary

15 December 2016 - U.S Dollar advances across all majors

By Shameem Musa

New Zealand Dollar:

 

The New Zealand dollar plunged lower through trade on Thursday losing more than 100 points following the Fed’s 25 basis point rate hike and hawkish assessment of domestic growth prospects. Having touched intraday highs at 0.7240 the Kiwi suffered a heavy sell off as investors turned to the Greenback and advancing U.S treasury yields as the Federal Reserve’s Open Market Committee increased their benchmark interest rate. While the move itself was largely anticipated the accompanying commentary buoyed investor confidence and prompted the rush on world’s base currency. The Fed raised the pace of expected rate hikes suggesting 3 increases would be appropriate throughout 2017, up from just 2 expected hikes in September. Plunging through 0.7150 and touching intraday lows at 0.7106 the NZD sell off has seemingly levelled out with technical supports @ 0.7115 taking hold. The NZD currently buys 0.7121 U.S cents.

 

We expect a range today of 0.7080 – 0.7180

 

Australian Dollar:

 

The Australian dollar has been heavily sold in overnight trade as the US Federal Reserve hiked interest rates whilst also flagging up to three hikes for 2017. In a session dominated by US dollar moves, investors snapped up the world’s reserve currency as policy makers delivered a slightly more hawkish outlook than many had expected. Briefly breaking below the 74 US Cents mark, the Aussie dollar has been sold off across the board as yields on US treasuries hit their highest level in more than five years. Having lost more than one US Cent overnight, the Australian dollar is set to face further challenges today ahead of a domestic labour market report. This morning the AUD currently buys 74.09 US Cents.

 

We expect a range today of 0.7370 – 0.7440

 

Great British Pound:

 

It was a busy 24 hours for the Great British Pound leading with UK unemployment rates steady at 4.8% and remaining at an 11 year low for the month of October. UK Employment claims rose slightly for the first time in a year signalling job markets could be readjusting for the first time since the Brexit decision. Initially the Sterling rose to an intraday high 1.2725 against the US Dollar before large buying of the Greenback flowed into the market as the US Federal Reserve increased their interest rates to a range of 0.5% -  0.75% as expected. The main reading in the FOMC Statement was the guidance of a potential for three interest rate hikes next year instead of the previous two with cable falling to a low of 1.2530. This evening will be dictated by UK Retail sales before the Bank of England releases their interest rate decision where it is expected to keep interest rates on hold.

 

We expect a range today of 1.7575 - 1.7750

 

Majors:

 

As widely expected the US Federal Reserve raised interest rates by 0.25% from 0.50% to 0.75% early this morning Australian time, the Greenback immediately advanced pushing the nineteen nation currency lower from 1.0495 to 1.0660, a drop of 1.5%. The big surprise was their unexpected hawkish tone and announcing three likely rate increases next year. GDP forecasts were revised slightly higher and were more optimistic on the labour market. USD/JPY was one pair that showed gains breaking through resistance levels of through 116.00 and advancing above 117.00. On the data front, U.S retail sales came in short of expectations and in Japan the Tankan manufacturers’ index rose in October signalling a lift in sentiment among large manufacturers.

 

Data releases:

 

AUD:

WBC-MI Inflation Expectations Dec, Unemployment Rate and Employment Change Nov

NZD:

Business NZ Manufacturing Index Nov; GDP Q3

JPY:

Flash Manufacturing PMI

GBP:

Retail Sales Nov, Bank of England Official Bank Rate

EUR:

Markit Manufacturing PMI Dec, Markit Services PMI Dec

USD:

CPI Nov, Philly Fed Manufacturing Index, Unemployment Claims, Empire state Manufacturing Index

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