23rd November – Daily Currency Market Report

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The Market in Brief:

            • AUD continues to strengthen
            • ECB’s Draghi promises further stimulus
            • UK Public Sector Borrow blows out
            • Gold $1,078 & DJIA 17,837

 

Market Events Due:

        • Japanese Holiday (Labour Thanksgiving Day)

 

 

 

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AUD/USD: Pushed higher as the market looks past next months expected FOMC interest rate hike and readjusts thoughts on the timing of the next tightening. This and a selloff in the European currencies, (see below), have given the A$ a much need boost for those buying offshore. We’ll have a slow start to the week with a Japanese holiday today and just a speech by RBA Governor Stevens the highlight tomorrow. Technically we expect the trend to continue with a target at the 50% retracement of the selloff seen since June that sits 135 points above.

AUD/NZD: Opens at 7 week highs due to the market pricing in an interest rate cut from the RBNZ on the 10th of next month and starts to favour rates staying on hold in Australia. There is no major data set to come for the rest of the week, so we are well supported and should push on from here.  

AUD/GBP: A huge blow out in UK Public Sector Net Borrowing gave the market further reason to believe an interest rate hike will not be forthcoming from the Bk of England. We therefore continued to re-adjust from the sell-off we saw at the start of the month, however with no major UK data until Friday and trend line technical resistance here, (from the highs of June and October), we may well see a short term correction.

AUD/EUR: Also rallied sharply as European Central Bank President Draghi again stated his desire to add further stimulatory measures to the economy, by way of longer / larger bond purchases and even lower interest rates. French and German Manufacturing data is due this evening and the German Ifo Business Survey comes tomorrow, all of which are set to show improvement so we’ll favour a small correction lower short term. However our view favours the trend continuing medium term with more upside and a target of the June highs 170 points above.  

ALTERNATIVE CURRENCY HEDGING: Ask us about a great alternative to traditional forward contracts that give the ability to cover at attractive levels, but with the flexibility to walk away should the spot rate improve or the contract not be required.

 

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Jim Devonport

Corporate & HNW Client Manager 

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