Daily Dollar Forecast 04/16/2012
Australian Dollar
The Australian Dollar fell from 10 day highs on Friday as a deceleration in the growth of the Chinese economy spooked investors. As a nation that relies heavily on Chinese demand for its exports, the local unit was understandably rattled by the news and it gapped close to 50 points on its release. Consolidating in the near term around 1.0390, a brief but valiant attempt at recovery saw the Aussie break back through $1.04 but fall short before 1.0420. Dropping back to find support at 1.0360/65 the Australian Dollar remains weighed down by renewed concerns for Spain as well as a decrease in US consumer sentiment. In a risk off environment, the Aussie dollar has fared better than others as investors predict it is possible Chinese GDP figures may prompt easing of China’s monetary policy. If this is indeed the case the Aussie will gain from a greater level of liquidity available to purchase Australian exports. Opening unchanged this morning at 1.0365 an absence of local data indicates the Australian Dollar will take direction from market sentiment and offshore developments.
We expect a range today of 1.0290 – 1.0390
New Zealand Dollar
The New Zealand Dollar fought hard against risk averse markets on Friday, rising to one month highs of 0.8310 despite taking a hit from a deceleration in Chinese economic growth. After falling from highs back to 0.8280, the Kiwi recovered to retest 0.8310 before turmoil in overseas markets finally took hold. Re-emerging fears for the health of the Spanish economy, as well as yet again softer than expected US data , deflated the New Zealand dollar and by close of markets it was trading lower at 0.8230. Looking heavy still this morning the local unit opens unchanged ahead of a week likely to be driven by investor sentiment. Against the Aussie, the New Zealand dollar set about re-claiming some of Thursday’s losses and after reaching daily highs above 0.7980 the pair consolidated back towards 0.7940 where it remains on open this morning.
We expect a range today of 0.8170 – 0.8250
Great British Pound
With market eyes on Chinese GDP growth figures and Spanish bond yields at end of last week the pound was relatively static against the greenback on Friday, remaining within its range of GBPUSD 1.58 - 1.60. Looking to the week ahead, whilst European data, specifically the price action of Spanish government borrowing, is expected to dominate investor sentiment and market chatter, in the UK a string of important data is released. Tuesday sees a string of inflation data coming out, most notably CPI figures (19.30 AEST), where inflation is expected to continue its weakening trend, falling from highs posted at the end of last year. Wednesday will bring key insight in to the main economic considerations of the members of the Bank of England’s MPC as minutes for the March meeting are announced (19.30 AEST). Skipping on to Friday, UK retail figures (19.30 AEST) will provide insight into UK consumer spending behaviour, and as a gauge for overall economic activity, could impact the pound if significantly different than expected. With risk sentiment uncertain at the start of the week, GBP is expected to remain range bound against the US dollar, Aussie and Kiwi, although trading could get choppy as events in Europe unfold.
We expect a range today of 1.5240 – 1.5360
Majors
Currency markets were rattled on the final day of trading last week as concerns emerged from three of the world’s most influential economies. Starting off in the Asian session, risk sentiment was dampened when it was revealed the Chinese economy grew at its slowest pace in three years. Posting an 8.1% increase in GDP, this was the lowest gain since mid-2009 and less than the 8.4% predicted by much of the market in a Bloomberg survey. The Euro dropped from levels near 1.3200 against the Greenback to dip back towards 1.3150 before its own local session added to market risk aversion. Concerns for the health of Spain’s economy resurfaced on Friday as yields on 10 year bonds rose back above 6%, and many expressed concern the indebted economy is too reliant on cheap finance loans from the European Central Bank. Tumbling a full cent in a few hours, the single currency only found support near 1.3070 and it remained within a 10-point range until the market close. Hammering the final nail in the coffin for any chance of a last minute recovery for risk was a decrease in US consumer sentiment alongside an un-noteworthy consumer price index. Friday’s trend of risk aversion has continued to spill over in to this week with the Euro trading at 1.0365 and USD/JPY finding itself back below 80.90 as the Bank of Japan conveys a slightly more neutral monetary policy stance. On the radar today is a speech to be given by BOJ Governor Shirakawa as well as retail sales data to come out of the United States this evening.
Data releases:
AUD: No data due for release
NZD: FPI m/m
JPY: BOJ Gov Shirakawa Speaks
GBP: Rightmove HPI m/m
EUR: Italian Trade Balance; Trade Balance
USD: Core Retail Sales m/m; Retail Sales m/m; Empire State Manufacturing Index; TIC Long-Term Purchases