Australian Dollar: Investors flocked to the Aussie dollar following yesterday’s surprise interest rate increase by the RBA. Despite the central bank having previously provided strong rhetoric pointing to an increase from 3% most analysts had been expecting the first increase in the cycle to come later in the year. The immediate reaction to the news saw the AUD/USD jump from 0.8750 to trade around 0.8850 within an hour and headed into offshore exchange looking to add to the gains. With U.S interest rates likely to remain near 0% for the foreseeable future and the RBA signalling its intention to continue to increase beyond 3.25% in coming months the differential, as its commonly referred to (difference between AUD and USD interest rates), will continue to widen adding support to the AUD/USD exchange rate. Overnight it peaked above 89 cents and opens this morning near the highs at 0.8890 with support at 0.8850 expected to hold intraday.
- We expect a range today in the AUD/USD rate of 0.8850 to 0.8950
Great Britain Pound: The Pound Sterling rallied from 1.5980 to an early London high of 1.6040 following a larger than expected 1.6% increase in Halifax House Prices for the month of September. The move was short lived however as woeful U.K Industrial Production data for August triggered an immediate sell off. Economists had forecast a decrease from +0.5% the previous month to around +0.2% however the -2.5% result caught the market by surprise and despite more USD weakness against the other majors GBP/USD fell to 1.5880. The combination of a massive rally in the AUD following the announcement of an interest rate increase in Australia and the drop in the GBP put the GB/AUD cross rate below 1.7850 at one stage and it opens this morning marginally below 1.7900.
- We expect a range today in the GBP/AUD rate of 1.7800 to 1.7950
New Zealand Dollar: An increase in the NZIER business opinion survey for the third quarter added some support to the NZD in early trade yesterday however it was the big news across the Tasman that instigated yet another rally in the Kiwi dollar. With the Aussie dollar rallying following a surprise increase in interest rates demand for the NZD/USD triggered a rise from 0.7290 to enter offshore exchange back above the 73 cent handle at 0.7330. Another positive session on U.S equity markets and rumours of a move away from USD oil pricing kept the Greenback weak overnight taking the NZD/USD to an eventual high of 0.7375, its highest level since July 2008. Some late profit taking sees it open trade back at 0.7330 with support below 73 cents likely to hold in Asia today.
- We expect a range today in the NZD/USD rate of 0.7285 to 0.7365
Majors: With little in the way of economic data for guidance currency markets continued the trend from earlier in the week selling the Greenback against other major currencies. The U.S dollar revisited last week’s lows around 88.60 and opens this morning at 88.75 in exchange with the Japanese Yen. Another positive session on Wall Street with equities finishing up over 1% for the second consecutive trading day continued to see the big dollar lose its appeal as a what is being referred to as a “safe haven” currency. Rumours that the Middle East oil producing nations are considering moving away from USD pricing for oil added to the selling. EUR/USD posted an overnight high of 1.4755 before some late profit taking sees it open in Asia this morning at 1.4715. Looking ahead markets are eyeing the European Central Bank meeting on Thursday for further direction where interest rates are likely to remain on hold once again.
- AUD: Aug Housing Finance, Aug Investment Lending & Sep AiG Performance of Construction Index - NZD: No Data Expected • USD: Aug Consumer Credit
- GBP: Sep BRC Shop Price Index
- EUR: Q2 GDP • JPY: Sep Eco Watchers Survey
- CAD: No Data Expected
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