Daily Forex Commentary

10 January 2017 - Sterling tumbles on heightened fears of hard Brexit

By Matt Richardson

New Zealand Dollar: 

The New Zealand dollar staged a recovery through trade on Monday recouping losses suffered into the end of last week and moving back through 0.70 U.S cents. The Kiwi rallied as investors took advantage of a Greenback slump prompted by a reduction in wider risk appetite, a fall in U.S treasury yields and a sharp drop across U.S stocks. The NZD touched intraday highs at 0.7032 before selling pressures and profit taking forced a small pull back. Moves through 0.7030 are likely to be tested in the short term with a break and close above this level opening the door to a possible move back through 0.71 and 0.7130. Attentions again turn to wider sentiment for direction with no headline macroeconomic data on hand to drive direction.

We expect a range today of 0.6930 – 0.7130

 

Australian Dollar:

The Australian dollar rose on Monday mainly due to renewed weakness in the US dollar. The Aussie broke through the 0.73 level in early trade touching a daily high of 0.7373, which was the highest level since December 15. Yesterday’s Building Approvals for the month of November rebounded, up by 7.0% on a monthly basis. The pair is currently trading at 0.7352. We now expect support to hold on moves approaching 0.7340 while any upward push will likely meet resistance around 0.7390. Attentions now turn to today’s Retail Sales´ figures for the month of November. The forecast for the November release is for an increase of 0.4%, following a gain of 0.5% in October.

We expect a range today of 0.7300 – 0.7400

 

Great British Pound:

The Great British Pound collapsed against all major currency pairs through trade on Monday suffering heavy sell offs following comments from Prime Minister Theresa May. Rhetoric proffered by the PM highlighted concerns among investors the UK may lose access to the European Union’s single market. May again reiterated the importance of ushering in new laws to manage immigration, suggesting she was not willing to compromise controls to stay in the single market. Sterling plunged over 1% against the USD moving through 1.22 and 1.2150 touching intraday lows at 1.2127. A hard Brexit now seems a certainty opening the GBP to further downside moves beyond support at 1.2080 and 1.20. Attentions today will again be with Brexit chatter ahead of Prime Minster May’s address to parliament during question time on Wednesday.

We expect a range today of 1.7150 -1.7550

 

Majors:

The US Dollar Index which measures a basket of currencies against the Greenback continued its retreat overnight. The market continues to digest the uncertainty of the future relationship between US and Russia in a Trump-led America. USD/JPY declined from intraday highs in the Asian session in light trading of 117.53 to test support levels at 116.00 on open this morning. Overnight once dovish Boston Fed President Eric Rosengren remarked for the US Central bank to step up interest rate increases to curb potential inflationary pressures. Eager eyes will be watching five other Fed Policymakers give speeches this week for further news on any potential monetary policy changes. Elsewhere the EUR/USD cross was trading slightly higher at 1.0570 as the European Union unemployment rate remained steady at 9.8% and German Trade balance figures were positive. Investors turn their attention to the Asia today as Chinese CPI and PPI data is released for the first time this year with a slight downturn expected. Reminbi gains continue to put pressure on the US Dollar with officials looking to pair recent declines in December.

 

Data releases:

AUD:

Retail Sales

NZDNo Data

JPY:

Consumer Confidence

GBPNo Data

EUR:

French Industrial Production

USD:

NFIB Small Business Index, JOLTS Job Openings and Final Wholesale Inventories

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