Forex Fundamental Analysis Reports

Forex Exchange Morning Report

New Zealand Dollar: Up and down for NZD

Another light data day yesterday resulted in stagnant trading for the NZD sitting in a 14pt range between 0.7808 and 0.7822. Overnight the NZD was bought from the outset, initially struggling to get over the 0.7850 barrier, before surging through a number of stop losses in the market and peaking at a fresh 25 year high of 0.7880. Stronger than expected US data helped ease concerns in the market that the Fed may look to cut interest rates by year end. This saw investors quickly turn on the NZD, selling it from 0.7880 down to 0.7818, just under the close of yesterday's local session.

Australian Dollar: Roundabout day for AUD

A quiet day in the local markets yesterday saw the AUD trade between 0.8568 and 0.8584 throughout. During the off-shore session, the AUD was bought by yield hungry investors who pushed it through 0.8600 for the first time in 18 years before it peaked at 0.8610. Like the rest of its major counterparts, stronger than expected US data overnight signalled the turning point for the AUD with investors selling the currency for the remainder of the off-shore session seeing it close at around 0.8560.

Major Currencies: Favourable US data eases interest rate cut concerns.

An unexpected rise in the ISM's non-manufacturing index for June helped push the USD higher overnight, easing concerns that the Federal Reserve may have to cut interest rates later this year. Further supporting the move and sentiment was the additional release of another report which showed a higher gain in private sector jobs, boosting expectations that tonight's payrolls data may also be stronger than expected. As expected the ECB kept interest rates on hold, however governor Trichet gave little away as to clues about potential future hikes, saying that he did not intend to sway the market's expectations about the future path of monetary tightening in the eurozone. The BoE did raise interest rates as expected, which saw the GBP maintain its recent bullish tone, with the BoE commenting that risks in the medium-term continued to lie to the upside and that most measures of pricing pressure remained elevated.

Overnight News

US ISM non manufacturing rises to 60.7 in June. The services and construction headline unexpectedly rose further in June, suggesting that favourable weather and flattering seasonals weren't the only factors lifting this index of business confidence earlier in Q2. However, the detail in the report was less impressive, with orders slowing a little and jobs barely changed. That suggests that the headline might not sustain its recent strength heading into Q3. The detail in the report also showed that construction was the best performing industry, followed by real estate, which is a little surprising given the malaise in the housing sector. The other twelve sectors all reported gains as well.

US labour market data overnight kicked off with the ADP estimate of private payrolls. ADP 'got it right' back in April but under-estimated strength in the official report in March and May. ADP's 150k estimate for June suggest a strong payrolls report tomorrow but it could also be that it is correcting for that weakness in March/May. So we aren't changing our 130k forecast for tonight's headline payrolls gain. Initial jobless claims rose 2k to 318k but there was a very steep jump in continuing claims in the prior week, which could be a signal of rising unemployment. It could also just be volatility.

The European Central Bank left the repo rate unchanged at 4.0%. ECB chief Trichet reiterated that the ECB was 'closely monitoring' the situation, which is a vague signal that rates might eventually go higher.

The Bank of England lifted the repo rate 25bps to 5.75%, the fifth hike since August last year. The statement noted that 'output growth has remained firm and appears to be evolving in line with the Committee's most recent projections'. Those projections in May had inflation back at the 2% target on the 2 year forecast horizon, based on one further rate rise (which was then market pricing), so that would seem to indicate that there is not a strong body of opinion on the committee seeking further immediate tightening.

Canadian data strong. A strong rise in the Ivey PMI to 67.4 in June and a 21.4% surge in May building permits.

Events Today
Date Country Release Last Forecast
6 Jul US Jun Non Farm Payrolls chg 157k 130k
Jun Unemployment Rate 4.5% 4.4%
Fedspeak: Yellen
UK May Industrial Production 0.3% 0.3%
Can Jun Employment Chg 9k 25k
G7 OECD Leading Index 105.3 n/f
9 Jul Aus Jun ANZ Job Ads 10.3% n/f
US May Consumer Credit $bn 2.6 8.0
Ger May industrial production –2.3% 1.0%

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