Weaker U.S Business Spending Dampens Rate Hike Expectations
Weaker U.S Business Spending Dampens Rate Hike Expectations
AUD / USD
Expected Range: 0.7150 - 0.7330
The Australian dollar recouped Wednesday’s losses rallying back through
0.72 U.S cents during trade on Thursday. Despite weaker than anticipated
private capital expenditure throughout the first quarter the AUD
bounced off supports, buoyed by a rebound in oil, to touch intraday
highs at 0.7244. Softer than anticipated U.S macroeconomic data and
profit taking dampened analyst hopes of a June rate increase as
investors adjusted expectations surrounding the path of Fed interest
rates. Fed Funds Futures indicated those anticipating a June/July lift
off slipped to just 26% down from 34% on Tuesday. With little of note on
the domestic docket today attentions turn to preliminary U.S first
quarter GDP numbers and Fed Chair Janet Yellen for direction into the
close and weekend.
NZD / USD
Expected Range: 0.6710 - 0.6810
The New Zealand dollar enjoyed mixed fortunes through trade on Thursday
touching intraday lows at 0.6694. The Kiwi suffered heavy selling in
early domestic trade following Fonterra’s latest milk price
restructuring. The dairy giant lowered its forecasts for production and
prices to 4.25 per kilo amplifying the strain suffered across the dairy
industry. Touching fresh one and a half month lows the NZD rebounded on
softer than anticipated U.S macroeconomic data flows and Greenback
repositioning, touching session highs at 0.6765. Attentions now turn to
U.S first quarter GDP numbers and Federal Reserve Chairwoman Janet
Yellen as markers of likely Fed policy action and direction into the
weekend.
GBP / AUD
Expected Range: 2.0100 - 2.0500
The Great British Pound relinquished some of the week’s earlier gains
slipping back below 1.47 through trade on Thursday. Weaker than
anticipated housing data coupled with flat first quarter growth
amplified the slowdown across the British economy. With attentions
squarely focussed on political uncertainty macroeconomic indicators have
been largely ignored of late however a string of weaker data sets has
led to increasing concerns surrounding the direction of the BoE next
policy move with some investors suggesting the Monetary Policy Committee
will be forced to cut rate or at the very east extend its neutral
policy setting well into 2017 in a bid to stimulate growth and revive
the recovery.
USD, EUR, JPY
The U.S dollar edged lower across the board through trade on Thursday
following a softer than anticipated core durable goods print and
weakness across business spending expectations. While orders for
long-lasting manufactured goods soared, non-defence and capital goods
edged lower marking the third consecutive monthly decline in business
expenditures. The weak print dampens expectations the Fed may raise
rates as early as June and investors continue to look toward September
as a launching pad for tighter monetary policy. The Greenback slipped
back through 110 JPY touching intraday lows at 109.43 while the Euro
rallied 70 points touching intraday highs at 1.1215. Attentions today
turn to preliminary first quarter GDP data and Fed Chair Janet Yellen.
Markets anticipate a poor read after a sluggish first quarter with any
upside surprises only spurring calls for a short term policy adjustment.
Investors will be keenly attuned to the rhetoric Yellen chooses to
adopt with the Fed Chair unlikely to promise anything the FOMC cannot
deliver. We expect some volatility leading into close as markets
position themselves ahead of the Memorial day long weekend.
