Daily Forex Commentary

16 December 2016 - Greenback hits 14-year high on US Dollar Index

By Shameem Musa

New Zealand Dollar:

 

The New Zealand dollar remained under pressure for much of Thursday’s session as the US Federal Reserve continued to communicate a relatively upbeat economic assessment for 2017. Placing the US economy firmly on the recovery path, a tightening labour market along with added price pressures has policy makers believing the US economy can absorb up to three interest rates increasing over the next 12 months. In what has clearly favoured the Greenback, the US dollar has gone from strength to strength over the past two sessions, sweeping up everything in its path. Explaining the Kiwi’s notable slide the New Zealand dollar lost further ground overnight slumping to a fresh low of 0.7010. Broadly weaker the Kiwi currently buys 0.7033 US Cents.

 

We expect a range today of 0.6980 – 0.7060

 

Australian Dollar:

 

Despite figures which showed 39,300 full time positons were created last month, Australia’s official unemployment rate surprisingly rose to 5.7 percent during November. Taking its second leg lower in as many days the Australian dollar has suffered further losses when valued against its US Counterpart over the past 24 hours, a mixer of both poor local performance combined with an aggressive plight of capital back into the world’s largest economy. Slumping to a low yesterday of 0.7337 the Australian dollar currently swaps hands a rate of 0.7356. Should the AUD be headed for a window of consolidation today, weekly losses would equate to approximately two percent ahead of another overnight session dictated by US data flows.

 

We expect a range today of 0.7300 – 0.7400

 

Great British Pound:

 

The Great British Pound continued its slide falling 2.5% since the US Federal Reserve’s decision to increase interest rates by 0.25% on Wednesday. On the domestic front, UK retail sales were up 0.2% from the month of October suggesting consumer confident remains resilient in the aftermath of the Brexit referendum. There were no surprises from the Bank of England overnight in their December meeting as they kept interest rates on hold at 0.25% along with no change to their current asset purchasing program. The Bank of England has predicted a “slightly lower path” for Inflation levels given the overall strength of the Sterling this month and expects inflation to hit 2.7% by the end of next year. The Great British Pound retreated lower after the BOE decision to touch an overnight low of 1.2380 before recovering slightly to open at 1.2425 in early morning trading.

 

We expect a range today of 1.7600 - 1.7740

 

Majors:

 

The Greenback strengthened yesterday when valued against a basket of major currencies, the US Dollar Index surged hitting its highest level in thirteen years. The main driver behind the force was an interest rate hike by the US Federal Reserve and in an accompanying statement signalled of further hikes in 2017. EUR/USD is once again lower buying at 1.0415 assisted by encouraging U.S data, weekly jobless claims fell by more than expected last week along with the Philadelphia manufacturing index, NY Empire State and Markit Manufacturing all coming in above forecast. USD/JPY has again soared hitting 10-month highs of 118.66 overnight, the pair has slightly retreated since but a bullish trend is still in place. The Bank of Japan will meet on December 18, and is expected to leave interest rates unchanged at -0.10%. Despite a sluggish economy, the bank has been hesitant to step in and ease policy, as negative rates have done little to kick-start economic growth or raise anaemic inflation levels.

 

Data releases:

 

AUD:

No Data

NZD:

No Data

JPY:

No Data

GBP:

BOE quarterly Bulletin, CBI Industrial Order Expectations

EUR:

Trade Balance Oct, CPI Nov, Current Account Oct

USD:

Building Permits, Housing Starts

 

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