Daily Forex Commentary

12 October 2017 - Inflation concerns sprinkled amidst FOMC minutes dampen USD upside

By Benjamin Hiscox

New Zealand Dollar:

 

The New Zealand dollar showed little to investors through trade on Wednesday tracking sideways as analysts await the final results of the September election. Bouncing off key technical supports at 0.7060 the Kiwi struggled to push beyond intraday highs at 0.7198 and met resistance on moves approaching the 0.71 handle. With little domestic data on hand to drive direction the NZD has suffered steep losses amidst ongoing political uncertainty and a declining Trade Weighted Index. And with little of note on hand to guide investor decision making the Kiwi will again be driven by further political developments.

 

We expect a daily range today of 0.6970 - 0.7130

 

Australian Dollar:

 

Despite a positive reading from Westpac’s Consumer Sentiment index, the Australian Dollar met resistance against the US Dollar once again around the 78c level yesterday. The pair touched a high of 0.7809 following the release however these gains were short lived and saw the pair pullback under. The survey rose by 3.6% in October which was positive but also comes on the back of an already solid improvement the month before. According to Westpac, the improvement was largely driven by optimism towards the economy in the year ahead and consistent coverage of the continuing improvement in the global economy, in particular the US. Another key point to note is job confidence at a household level has improved to its best level since 2011. Locally, today sees the release of second tier data with housing finances and inflation expectations. The AUD/USD is currently changing hands at 0.7785.

 

We expect a daily range today of 0.7730 - 0.7830

 

Great British Pound:

 

The Great British Pound has traded within a tight range during the overnight session, opening this morning marginally higher at 1.3222. Oscillating between 1.3202 and 1.3227, the Sterling registered a relatively calm day for the week with little on the domestic economic calendar to drive momentum. The Cable did however receive a marginal bump after the Federal Open Market Committee released their meeting minutes although this has gradually been sold down to reach current levels. The Pound now enjoys another quiet day on the domestic economic calendar with focus shifting to across the Atlantic with US PPI and Unemployment numbers due for the American session. Traders will also be keeping one eye open on the ECB President Draghi’s speech.

 

We expect a daily range today of 1.8530 - 1.8780

 

Majors:

 

The U.S Dollar suffered a second consecutive daily depreciation, edging lower through trade on Wednesday and touching two week lows when valued against G-10 counterparts. The Dollar met selling pressure on release of the Federal Reserve’s FOMC meeting minutes. While the account of policymaker’s discussions offered little to drastically change the wider outlook concerns surrounding persistently low inflation led some market analyst to reduce their expectations for a December rate hike. Although largely priced in CME’s Fed Watch tool fell from 91% to 88% and corresponded with a dollar dip toward 112 JPY and Euro advance back through 1.1850 and intraday highs at 1.1870. It appears momentum has stalled and the recent USD rally has slowed as investors balance monetary policy outlooks and expectations for Tax reform. With attentions keenly attuned to diverging Monetary policy outcomes considerable focus will be placed on comments from ECB president Mario Draghi as he hits the wires this evening while U.S inflation and retails sales remain the big ticket macroeconomic items guiding direction into the weekend.

 

Data releases:

AUD: 

MI Inflation Expectations and New Home Loans

NZD:

 FPI m/m

JPY: 

Bank Lending, PPI y/y and Tertiary Industry Activity m/m

GBP:

 BoE Credit Conditions Survey

EUR:

 French CPI, Industrial Production and ECB President Mario Draghi Speaks

USD:

 PPI m/m, Unemployment Claims, FOMC Members Brainard and Powell Speak, Natural Gas Storage, Crude Oil Inventories, 30 Year Bond Auction and Federal Budget Balance. 

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