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Forex Market Review – ECB Meeting in Focus

Tomorrow the European Central Bank will meet to announce their monetary policy decisions including the details of two new stimulus measures which are scheduled to begin this month – an Asset Backed Security purchase program and a Covered Bond purchase program.

The ECB has been one of the more active central banks recently; with the announcement of the scale of the new liquidity measures this week the market has the potential to move quite dramatically. Economists are expecting that after a weak uptake from last month’s first T-LTRO that the ECB will need to act more aggressively in the size of its other easing measures in order to meet its balance sheet growth target. The ECB indicated in September that it was seeking to increase the size of its balance sheet back to 2012 levels, which implies easing of around one trillion Euros; the first T-LTRO saw demand for only 82.6 billion, though Mario Draghi stated that this fell within their expected range.

Expectations are high for the size of the new easing measures, and the market is likely to move strongly on whether the ECB satisfies or disappoints in the announcement. It is expected that the combination of both new purchase programs could reach as high as 500 billion, however analysts are expecting a little less than this on average.

As Draghi previously stated:

 “The Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities (ABSs) with underlying assets consisting of claims against the euro area non-financial private sector under an ABS purchase programme (ABSPP). This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter, as decided by the Governing Council in June. In parallel, the Eurosystem will also purchase a broad portfolio of euro-denominated covered bonds issued by MFIs domiciled in the euro area under a new covered bond purchase programme (CBPP3). Interventions under these programmes will start in October 2014. The detailed modalities of these programmes will be announced after the Governing Council meeting of 2 October 2014. The newly decided measures, together with the targeted longer-term refinancing operations which will be conducted in two weeks, will have a sizeable impact on our balance sheet.”

With the majority of the balance sheet expansion expected to come from the ABS program rather than the covered bond program, economists have rightfully called in to question the size of the ABS market in Europe as a potential obstacle to scale – around one trillion Euro. The size of the program will also be affected by the composition of the ECB’s portfolio; from the statement above, the ABS program is likely to be limited to “simple and transparent asset-backed securities (ABSs) with underlying assets consisting of claims against the euro area non-financial private sector” which further reduces the possible size of the program. This meeting will be crucial for traders to get some confirmation of the scope and scale involved in the two programs.

On interest rates, while the ECB has indicated that it is not impossible that rates could further be adjusted the weight of expectations is for no change on the current levels at this meeting. Should the ECB act further on rates it would take the market by surprise again. If the ECB stays with the current rate levels then most of the meeting’s surprise is likely to come from the size of the program relative to expectations. The Euro continued to drop sharply yesterday, falling a further cent to 1.2570.

US Non-Farm payrolls are also likely to rattle markets on Friday when the figure is released alongside the Unemployment Rate and Trade Balance. Economists expect a number of approximately 216,000 – up from last month’s 146,000 – with the Unemployment Rate expected to remain at 6.1% and the US Trade Balance forecast to come in near to last month’s number at a deficit of 41 Billion. The US dollar has firmed recently on diverging monetary policy and improving data coming out of the US.

Forex Market Review – NZD Capitulates

The New Zealand Dollar plummeted further on news today that the RBNZ had been a heavy seller of the country’s currency in the previous month, comments by Prime Minister John Key supported this by stating that the ‘Goldilocks’ level for the NZD was around 65 US cents and indicated that the RBNZ could intervene to push the dollar lower. The NZD fell a further one and a half cents today against the US Dollar.

Markets are set for another volatile week, with the ECB’s Thursday Press Conference hotly anticipated for fresh details about the central bank’s ABS and covered bond purchase programs. At the September meeting Mario Draghi announced that the details (or modalities) of the ABS purchase programs would be announced following October’s meeting:

“The Eurosystem will purchase a broad portfolio of simple and transparent asset-backed securities (ABSs) with underlying assets consisting of claims against the euro area non-financial private sector under an ABS purchase programme (ABSPP). This reflects the role of the ABS market in facilitating new credit flows to the economy and follows the intensification of preparatory work on this matter, as decided by the Governing Council in June. In parallel, the Eurosystem will also purchase a broad portfolio of euro-denominated covered bonds issued by MFIs domiciled in the euro area under a new covered bond purchase programme (CBPP3). Interventions under these programmes will start in October 2014. The detailed modalities of these programmes will be announced after the Governing Council meeting of 2 October 2014. The newly decided measures, together with the targeted longer-term refinancing operations which will be conducted in two weeks, will have a sizeable impact on our balance sheet.”

This meeting will be crucial for near term direction in the Euro; the size and composition of the programs important for determining the impact on both the size of the ECB’s balance sheet as well as impact on the broader economy. Many are now expecting that the ECB will be forced to implement a full scale QE program before the end of the year.

Before the ECB can meet there will be further European data to shape expectations; German CPI is released today with expectations that inflation will remain weak at -0.1% month on month; on Tuesday Eurostat will release Euro wide Flash CPI with expectations that the measure will show continued weakness – economists are expecting an inflation rate of 0.3% year on year. While at some point the recent depreciation in the Euro should begin to swing these measures back towards inflation, it may take some time and the ECB will face continued calls for additional stimulus until this happens.

Other data will likely be of less importance this week, apart from Friday’s Non-Farm Payrolls figure out of the US. However, of some note early in the week will be tomorrows Japanese monthly numbers, with Average Cash Earnings, Retail Sales and Household Spending all watched to gauge both the success of Abenomics as well as the potential for the central bank to do more to stimulate sustainable inflation. Also in Asia, Chinese HSBC Final Manufacturing PMI and Manufacturing PMI are both expected to signal expansion at 50.5 and 51.5 respectively, potentially bringing some respite for the Australian dollar after a 7 cent fall this month.


Forex Market Review – RBNZ Talks Down the Kiwi

Of the three speeches by central bank chiefs yesterday, only the Pound was moved significantly with some help from a worse than expected US Durable Goods Orders figure – rallying half a cent. Speeches by RBA Governor Glenn Stevens and ECB President Mario Draghi did not provide anything new for traders to get excited over, though Stevens did discuss macro-prudential controls as an alternative to interest rates to fight out of control housing speculation.

US data has been the main focus to close out a quiet week; New Home Sales surprised to the upside on Wednesday with a reading of 504,000 versus analyst expectations of 432,000; Durable Goods Orders conversely surprised to the downside, with a decline of 18.2% – the figure is not as bad as it appears, given that last month saw a large increase due to aircraft orders and the large month on month decline is strongly affected by this. There were no surprises in the employment data, with Unemployment Claims coming in as-expected at 293,000 in line with trend. US Final GDP will be announced tonight to round out the week; the figure is for Q2 2014 and will be expected to show growth of around 4.6%.

The New Zealand dollar fell sharply on comments by Graeme Wheeler, the head of the RBNZ:

The Bank’s analysis indicates that the real exchange rate is well above its sustainable level, and also above levels justified by short-term business cycle factors,”

Unjustified and unsustainable are important considerations in assessing whether exchange rate intervention is feasible. Another consideration is whether conditions in the foreign exchange markets are conducive to intervention having an impact on the exchange rate.

“The real exchange rate has not adjusted materially to the recent downward movement in commodity prices. For example, global dairy prices have fallen by 45 percent since February 2014.  Despite this, in August, New Zealand’s real effective exchange rate was 1 percent higher than its February 2014 level.”

The NZD has fallen one and a half cents following the statement, and now sits at 0.7930

The German Ifo Business Climate survey showed a decline and a miss of expectations, falling to 104.7 against expectations of 105.9. While not a crucial data point in the grand scheme of things, the poor reading is another in a long line indicating that the ECB needs to do more to combat the Euro Area’s weak economic performance and falling inflation. Many are now calling for the ECB to take steps towards an outright QE program after the first round of T-LTRO’s failed to deliver a meaningful balance sheet expansion; this should make next week’s ECB meeting quite an interesting event, as traders will have high hopes for the ABS purchase program that is to be announced as well as supplementary measures to aid balance sheet expansion.

Forex Market Review – Australian Dollar Continues to Decline

There were no fireworks during Mario Draghi’s testimony on Monday, with the President indicating that the economic recovery in the euro area is losing momentum, and that announced liquidity measures would begin the process of maintaining price stability.

The most important sentence in the speech may have been this:

“With the purchase programmes, we are starting a transition from a monetary policy framework predominantly founded on passive provision of central bank credit to a more active and controlled management of our balance sheet.”

Such a policy change is similar to those seen in the US and Japan who replaced interest rates as a policy tool with balance sheet management through Quantitative Easing after reaching the zero lower bound. While the foundations of a sovereign debt based QE program are still far from firm, it does seem that the ECB is moving in the direction of making it a reality.

Draghi also addressed the small size of the ABS market in Europe and whether the size would limit an ABS purchase program:

“Is the market for ABS, in particular, sufficiently ample to allow sizeable purchases? Our purchases will include a fairly wide range of simple and transparent ABS collateralised by loans to the real economy. The total stock of eligible securities which is currently outstanding – held in investors’ portfolios or retained by the originating banks – is already sizeable. We are confident that it will grow as a result of our presence in the market. Over time, as our purchases contribute to a normalisation in trading conditions, secondary market and issuance activity will expand in those segments that are currently inactive.”

The Euro fell slightly by a quarter of a cent around the testimony but soon recovered its losses.

The AUD reacted in a confused manner to stronger than expected Chinese manufacturing data. The HSBC Flash Manufacturing PMI showed that the industry is still in expansion after analysts forecast an even 50.0; the true number proved to be a little stronger at 50.5 though the AUD did not react strongly to the announcement – oscillating up 50 pips, down 50 pips and back up 50 pips before plummeting 100 pips to finish the day at around 0.8840 against the US dollar. Similarly European PMI’s were mixed, leading to a rally of half a cent which soon reversed to finish the day flat.

Still to come this week will be US New Home Sales – expected to show a reading of 432,000 – as well as Durable Goods Orders which are forecast to be 0.7% and -17.7% month-on-month for the Core and Non-Core figure respectively. Speeches by the Governors of the RBA and the Bank of England may also cause some interest on Thursday, however given the AUD’s hasty decline below 90 US cents this month it is becoming less likely that Glenn Stevens will use his speaking opportunities to jaw-bone the currency lower.

Forex Market Review – Draghi Testifies

The data flow is front loaded this week, with some important PMI’s scheduled for release on Tuesday. High impact European and Chinese PMI’s will be out, with most other country releases set for the following week. Also expected to impact markets early in the week will be Mario Draghi’s testimony on monetary policy tonight in Brussels.

ECB President Draghi will testify before the European Parliament’s Economic and Monetary Committee tonight. The hearing usually involves an introductory statement by the President which is pre-prepared for the event, followed by a question and answer session. Given that the uptake of the first round of T-LTRO’s last week failed to meet expectations there are some lines of questioning which have the potential to generate a market reaction:

  • Does the low uptake from the LTRO mean that the ECB will fail to meet its balance sheet expansion target?
  • Will a weak T-LTRO mean an expanded ABS purchase program to offset it?
  • Given the small size of the ABS market, will the ECB need to work towards implementing a full scale QE program to have sufficient impact?
  • Was the negative deposit rate a factor in the low demand for T-LTRO funds, given that banks would be charged for holding the excess reserves until borrowers can be found?
  • If the above is a factor, is the negative deposit rate worth persisting with given the small and shrinking size of excess liquidity in the banking system?
  • Due to the already low yields in the Euro Area, would a QE type program still target yields or would it look to fight deflation through exchange rate depreciation a la Japan under Abenomics?

It is easy to come up with many such questions, however the committee may not be so bold and leave future developments in monetary policy to the next ECB Press Conference. In any case, the hearing will certainly generate some interest even if no new information is garnered.

From the PMI’s that are out this week perhaps the most interesting is the HSCB Flash Manufacturing PMI to be released on Tuesday. Economists are expecting a reading of 50.0 which indicates neither expansion nor contraction in the industry. Chinese figures are coming under greater scrutiny at the moment after some awful Industrial Production figures were posted last weekend; year on year growth in Industrial Production fell from 9.0% to 6.9%, while Fixed Asset Investment also surprised to the downside with a drop from 17.0% to 16.5%. China is also in the midst of a general housing slowdown across all major cities, showing falls month on month reminiscent of a few years ago. With the Australian dollar having sold off four and a half cents in the past month on this weak data and general US dollar strength it is clear the data flow for the AUD is currently negative. However, with a stream of negative data flow comes strong short positioning – leaving traders open to a short squeeze. This PMI figure will be one to watch, as at 50.0 a deviation either side will be likely to affect sentiment given that it indicates the difference between expansion and contraction.


Forex Market Review – Pound Strengthens on Scottish Vote

Moves in the FX market have been increasingly volatile in recent weeks, and this was no exception. Some may have been expecting a sharper move in the Pound given the importance of the announcement, however the nature of an all-day vote meant that the currency was subjected to episodic volatility as the votes were updated but no major surprise as it gradually become clear the No votes had the victory; Scotland is set to remain in the United Kingdom for now. Despite a shock result, the Pound managed a respectable range of 350 pips this week with GBP/JPY and GBP/AUD both exceeding 500 pips in the lead-up to the vote. While the result helped regain some strength for the pound, longer term the close result does provide some cause for concern. Votes are still being tallied, however the final vote is looking likely to fall around the 55%/45% mark in favour of No – a fairly even contest and indicative of future interest in another referendum. The pound sits at around 1.6450 at the time of writing.

The ECB allotment was surprisingly low compared to analyst forecasts, but failed to generate much heavy trading. Economists had expected an uptake of between 100 and 300 Billion Euros for the first T-LTRO program, however the program only generated interest of 82.6 Billion. The Euro did not react much on the announcement, drifting lower by a quarter of a cent before finishing the day around half a cent higher against the US dollar. The uptake means that the next program in December will need a very strong subscription in order for the ECB to offset its shrinking balance sheet. The two new T-LTRO’s must offset the previous LTRO’s which are maturing in January and February 2015.

The FOMC Statement and press conference caused strong demand for the US Dollar. The Statement itself was not overly hawkish, thought the new dissenting voice of Richard Fisher:

“President Fisher believed that the continued strengthening of the real economy, improved outlook for labour utilization and for general price stability, and continued signs of financial market excess, will likely warrant an earlier reduction in monetary accommodation than is suggested by the Committee’s stated forward guidance.”

While the Fed kept it’s wording:

“… that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends…”

There was some speculation that this would be altered to reflect the next step in tightening after Quantitative Easing ends. What was confirmed, however, is that QE is on track to end next month with the Fed choosing to reinvest maturing securities until after the first rate rise occurs. This means that while the Fed’s balance sheet will no longer grow it will stay roughly constant in nominal terms until the Fed begins its rate tightening cycle. After this point the Fed is likely to simply allow its security holdings to mature and will remit the profits to the US Treasury. The move was felt strongly in all US Dollar pairs, with EUR/USD falling over 125 pips and USD/JPY rising around 150 pips.

Forex Market Review – FOMC, ECB and the Independence Vote

Today marks the beginning of a potentially volatile trading period for the Pound, Euro and US Dollar due to three major news events. The FOMC is the first to affect markets, with the FOMC statement to be released at 21:00 server time today; this will be followed by a press conference at 21:30 server time where Janet Yellen will expand upon the FOMC statement and then take questions regarding monetary policy.

Analysts have been focusing heavily on the wording of interest rate rises as the potential market mover:

“The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.”

There is some speculation that with Quantitative Easing considered on autopilot to end in October, the Fed will change this sentence to reflect that rates could start rising by mid-2015. With economists generally accepting that the FOMC will reduce asset purchases by a further 10 Billion at this meeting, there is also potential for them to outline how the final 15 Billion will be reduced. Current expectations are that this final amount concludes in October and the purchases will be concluded at next month’s meeting. With tapering largely priced in, most of the action in currency markets is likely to surround the wording of interest rate rises above, as well as any indication on next month’s tapering and the concurrent economic forecasts.

The European Central Bank is the next in line to move currency markets; the ECB will announce the allotment of its first Targeted Long Term Refinancing Operation on Thursday. The ECB released the following updated modalities in July regarding the timing of the programs – the allotment at 11:15am Frankfurt time is likely to be the market mover:


Since zero interest rate policy was reached during the GFC, traders have had one eye on central bank balance sheet expansion as an indicator of easing; T-LTRO’s being one way in which the ECB can expand its balance sheet. Traders will be looking at the size of the allotment relative to expectations as a guide to which way the Euro will move. While it is never clear exactly how the market will react, a strong uptake could lead to Euro weakness as traders see the ECB expanding its balance sheet by a larger amount, while similarly a weak uptake could see a short squeeze as implied easing is not confirmed and positions unwind. Since the previous LTRO programs, banks have been repaying their loans prematurely which has put downwards pressure on the ECB’s balance sheet; the ECB is seeking to buck this trend and return the balance sheet to 2012 levels.

There are some factors that will influence the uptake of the program that are worth considering. Firstly, while the program is intended to stimulate new lending to the private sector there is no clear penalty in place for misdirection of the funds away from lending apart from early repayment of the funds – this may lead to demand for other purposes. The ECB states:

“Counterparties that have borrowed in the TLTROs but whose eligible net lending in the period from 1 May 2014 to 30 April 2016 is below the benchmark will be required to pay back their borrowing in September 2016, in accordance with the ECB Decision.”

However with yields far lower now than at the time of the previous LTRO’s it is not clear that the risk/return profile is still favourable for this sort demand.

Secondly, the ECB’s latest rate cut brings the cost of funding through the program down to 15 basis points, which should help to spur demand for the funding and may have been a factor in the ECB’s decision to surprise markets at the previous meeting.

Thirdly, while not directly related to the current uptake of the program it should be noted that the current LTRO’s occur around the same time as the previous LTRO’s from 2011 and 2012 are maturing. These programs mature in January and February 2015 and will partly offset the balance sheet increase due to the new round of T-LTRO’s as banks repay previous loans.

During the ECB allotment – but to be announced afterwards – Scottish citizens will be voting in a referendum as to whether Scotland should be independent from the United Kingdom. A ‘Yes’ vote will mean Scotland separates from the union, while a ‘No’ vote will result in the country staying a part of the UK.

Votes are strongly divided according to the most recent polling by YouGov, with 52% of those surveyed indicating a No vote and 48% indicating a Yes vote on a head to head basis. On current indications this means that there would be no separation between the countries. One thing to keep in mind is that these polls exclude those who don’t know or wouldn’t vote, and these citizens may not feel strongly enough about the separation to take the plunge and vote Yes.


That said, Scotland would be likely to control the majority of oil revenues coming out of the current United Kingdom, with some analysts indicating that Scotland would receive up to 90% of oil revenues – a great boon for the economy and one reason for a strong showing on a Yes vote.

A Yes vote is likely to have an effect that reaches farther out than the UK economy. The Pound has potential to drop or rise very strongly depending on the outcome; the effect will depend upon both the positioning of traders ahead of the release and outcome.

The Pound is not the only currency that could move sharply on an announcement; the sentiment in Europe for parting from various unions such as Catalonia from Spain and Greece from the Euro would be heavily influenced by Scotland setting a precedent. Traders should be on the lookout for knock-on effects of the vote on currencies such as the Euro during this time. Historic events such as this can have dramatic outcomes, and the effect on markets can present both opportunity and risk.

Forex Market Review – Three Major Market Movers

This week has the potential to be one of the more important in the latter half of the year, with the combination of the FOMC statement, the UK/Scottish Independence Referendum and the ECB’s first Targeted LTRO program. While these headlines will dominate trading for the week, there is plenty of supporting data to keep traders busy.

Tuesday will be the start of a volatile period with the RBA releasing its monetary policy meeting minutes. The minutes will be closely watched for an indication of where the RBA’s next interest rate move is likely to be. The central bank has held interest rates at 2.50% since August 2013 and there is a case to be made for both rate cuts and rises; with strong house price growth bringing calls of a housing bubble and a weak economy in the wake of the mining investment boom Governor Glenn Stevens is caught between a rock and a hard place on how to use the blunt tool of interest rates. For Australian dollar traders, any indication about which way the bank will begin to lean is highly sought after.

Bank of Japan Governor Kuroda is the next to influence markets. With the central bank’s QE program helping to send the Yen to levels not visited for 6 years, there have been rumours that the BoJ may further expand the program towards the end of the year to once and for all vanquish the threat of deflation. This rumour is offset by a falling approval rating for Shinzo Abe, with many disapproving of the policies that have been the hallmark of his tenure. Some economists have noted that the inflation is the wrong kind, being cost-push and driven mostly by rising energy prices which must be important with a weaker Yen. The right kind of inflation might be driven by rising demand for consumption and investment among the private sector, accompanied by wage growth. The press conference will be one to watch to see if Kuroda uses the platform to further influence traders’ expectations on the bank’s policy.

Ahead of the Scotland Independence Referendum, UK CPI will come out Tuesday at 11:30am server time. The data point may pale in comparison to the coming independence vote, but the data will be important in the medium term for interest rate expectations; economists expect a slightly lower 1.5% reading for this month compared to the 1.6% last month. UK data stays strong all week, with employment data the next to be released at the same time as the MPC’s Bank Rate Votes. Employment is expected to have a strong showing this month, with wages forecast to grow 0.5%; unemployment claims are also expected to decrease by 29,700. The Bank rate votes will also be important; the August votes revealing the first dissenting votes in a long time and indicating that two members had a preference for raising interest rates. The Pound sits at 1.6240 after retracing last week’s weekend gap.

A more detailed analysis of the FOMC statement, LTRO allotment and the Scottish Independence vote will follow on Wednesday.

Forex Market Review – Australian Employment Data

The Australian dollar spiked higher on Thursday by half a cent on the release of surprising employment numbers. The report showed that the number of employed people had jumped a seasonally adjusted 121,000; the unemployment rate fell to 6.1%. As a reminder, analysts were expecting an increase employed persons of 15,200 and an unemployment rate of 6.3%. The discrepancy resulted in disbelief and ridicule from various market commentators, and perhaps rightfully so.

The last two figures have come in to question over the seemingly unbelievable month on month changes. The issue again is related to a changed survey sample, resulting in increased volatility in the monthly numbers. The 121,000 figure represented a huge outlier and the highest figure in the series since 1978. Traders reacted with initial shock, however once the reality sank in that this was subject to noise and seasonal adjustment they resumed selling the Aussie to bring the currency down a further one and a half cents. The Australian dollar reached a low of 0.9060 overnight.

The RBNZ held steady on interest rates as expected, signalling a continuation of a period of interest rate stability with expectations that further tightening could occur if warranted:

“In light of these uncertainties, and in order to better assess the moderating effects of the recent policy tightening and export price reductions, it is prudent to undertake a period of monitoring and assessment before considering further policy adjustment. Nevertheless, we expect some further policy tightening will be necessary to keep future average inflation near the 2 percent target mid-point and ensure that the economic expansion can be sustained.”

The New Zealand dollar reacted with a small sell-off, and the currency is down over half a cent since the announcement hit the airwaves.

The Pound continued to rally strongly on Scottish independence news, with a new poll released by YouGov showing a shift back towards favour of staying within the currency union; the new results showed that the votes were currently 52% / 48% in favour of a No vote on independence. The Pound regained two cents against the US dollar, but the major move was in the Yen cross; GBP/JPY has risen over 500 pips since the selloff that started the week. The referendum is scheduled for September 18th next week.

The remainder of the week is light on for market moving news, however US numbers out tonight may provide enough impetus for a small reversal or continuation. Core Retail Sales and Retail Sales are expected to grow at 0.2% and 0.3% respectively, while UoM Consumer Sentiment is forecast to show a slight uptick to 83.2

Forex Market Review – Australian Dollar Takes a Tumble

The Pound continued to fall a further one and a half cents against the US dollar on fears of a split between the UK and Scotland at the upcoming referendum for independence, completed on September the 18th. The UK currency reached a low point of 1.6060 yesterday after some as-expected data – Manufacturing Production increased 0.3% over the month, however this was in line with forecasts and failed to surprise the market. At the Trade Union Congress, BoE Governor Mark Carney signalled that a rate rise may occur as soon as spring 2015, which may have been a slower tightening cycle than market participants expected, with a decline of over half a cent following the speech. With the Inflation Report Hearings today, GBP volatility may be an ongoing theme.

The resilient Australian dollar has finally shown signs of heading lower with commodity prices and the terms of trade. The Dollar broke out of a range that has been in place since April, with a fall of two and a half cents sparked by sliding sentiment surveys and some underwhelming credit growth data. The NAB Business Confidence survey declined from 10 to 8 on Tuesday, while the Westpac Consumer Sentiment survey showed a decline of 4.6%. Amongst the weak surveys, Home Loan Growth was also released, showing a growth of only 0.3% over the previous month. While none of the data was particularly damming for the Australian economy, the persistent US dollar strength helped guide the currency lower to 0.91550.

Tomorrow morning should provide opportunity for trading Australasian currency pairs, with New Zealand announcing their Cash Rate during roll-over, which is expected to remain at 3.50% after a series of rate rises. Following on from this will be Australian Employment data and Chinese CPI. Employment is expected to grow strongly, with 12,200 jobs expected to be added and the unemployment rate expected to tick down slightly to 6.3%. This report follows a shocking release last month which saw the unemployment rate skyrocket. There was indication was some of the jump was related to a change in the survey rather than a dramatic deterioration in conditions. Chinese CPI is expected to moderate even lower to 2.2%.

ECB President Mario Draghi will speak at the Eurofi Financial Forum tomorrow night and BoJ Governor Kuroda will speak the following morning on Friday – neither are expected to provide a shock for traders, however the events are something to be aware of. Friday wraps up the trading week with some US data. Core Retail Sales and Retail Sales are expected to grow at 0.2% and 0.3% respectively, while UoM Consumer Sentiment is forecast to show a slight uptick to 83.2

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