Daily Forex Commentary

21 December 2016 - US Dollar remains in a resilient mood

By Joel Holmes

New Zealand Dollar:

 

 

Aligning with a US Dollar which rose to a fresh 14-year high yesterday, the New Zealand dollar briefly slumped to a low of 0.6882, unable to keep pace with what appears to be all one way traffic at present. In line with results which were largely expected prices fell during the latest Global Dairy Trade auction overnight, further weighing on the Kiwi. Highlighting just how strong a push it has been back into the world’s reserve currency, global risk settings would have otherwise provided an environment primed for a higher New Zealand dollar. Opening only 10 basis points lower the Kiwi currently buys 69.18 US Cents  

 

We expect a range today of 0.6880 – 0.6950

 

Australian Dollar:

The Australian dollar traded between a low of 0.7222 and a high of 0.7262 when valued against its US Counterpart yesterday, following the release of minutes from the RBA’s December meeting which showed that policy makers are content with leaving interest rates alone for the time being. Amid higher household debt levels triggered by record low borrowing costs there was an overall cautionary tone to the minutes recognising the need to support growth whilst also protecting real incomes. With markets expected to soon move into holiday mode, it continues to be the strength of the US dollar which weighs most on the domestic unit. Opening fractionally higher the Australian dollar buys 72.53 US Cents.

 

We expect a range today of 0.7220 – 0.7280

 

Great British Pound:

The Great British Pound was caught under pressure for a second consecutive day as both the UK Prime Minister Theresa May and Nicola Sturgeon, the leader of the pro-independence Scottish National Party set out their Brexit positions yesterday. Both have very different views on Scotland’s position with Sturgeon wanting Scotland to stay in the EU. The GBP/USD cross touched a low of 1.2310 before recovering back to 1.2365. On the data front, according to CBI’s latest monthly Distributive Trade Survey retails sales growth accelerated in the year to December which were considered well above average for this time of year, it is however expected to slow in the year to January.

 

We expect a range today of  1.7720 – 1.7980

 

Majors:

The U.S dollar made fresh 14 year highs through trade on Tuesday as markets recovered from the shock attacks in Germany and Turkey and attentions returned to macroeconomic markers and central bank commentary. With little data on hand markets responded to comments from Janet Yellen, wherein the Fed Chair reiterated the FOMC’s expectations for a faster pace of interest rate adjustments through 2017. The comments bolstered U.S Treasury yields and investors pushed the Euro through 1.04 to touch intraday lows at 1.0353 while the Yen gave up Monday’s gains. The Bank of Japan opted to maintain the current monetary policy platform re-affirming its commitment to achieving stability across interest rates and bolstering growth. The commentary left some feeling short changed on expectations the BoJ would signal a withdrawal or scaling back of the current stimulus facilities. The Greenback moved through 118 JPY to touch intraday highs at 118.24 before profit taking saw the world’s base currency move marginally lower to trade at 117.77 at time of writing. Attentions now turn to Crude Oil Inventories ahead of Thursday GDP and Durable Goods Orders as the headline markers for direction leading into the festive break.

 

Data Releases

AUD: 

No data today.

NZD: GDT Price Index, Trade Balance

JPY: 

 No data today.

GBP: 

Public Sector Net Borrowing  

EUR: 

No data today. 

USD: 

Crude Oil Inventories. 

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