Wondering what’s on today? Tuesday started with AUDUSD in recovery mode post RBA meeting minutes and GBP in narrow range. Fed Chair Janet Yellen is also due to speak today at 11:00pm GMT, and USD bulls and bears alike are lying in wait for some data regarding rate hikes. Will it, won’t it happen this December?
AUDUSD in Recovery Mode Post RBA Meeting Minutes
Aussie-dollar added 50 pips, approaching the 0.7590 handle. RBA Governor Phillip Lowe’s speech today helped the pair rebound and leave the 5-month trough it was in. AUDUSD saw some strong bidding after Lowe highlighted that rate hikes are very likely in the near future, although weaker inflation would keep any interest rate hikes off the near-term docket.
Despite the rather dovish RBA meeting minutes, Governor Lowe’s comments provided some impetus for the AUD bulls and triggered some short-term bounce. Additionally, a weaker tone surrounding the US Treasury bond yields, which tends to keep flows away from high-yielding currencies like the Aussie, combined with a weaker US dollar price action could hardly hinder the pair’s recovery.
Speaking of the USD, Fed Chair Janet Yellen is also scheduled to speak today and investors will be looking for clues regarding further rate hikes this year. On Monday, Yellen said she would end her tenure as soon as Jerome Powell was confirmed and sworn in to succeed her as chairman of the US central bank.
The Federal Reserve is due to hold its final policy meeting this year on 12 – 13 December. Chances are almost 100% in favour of a new rate hike at the meeting. For 2018, the Feds envisage three rate hikes, but the market sentiment revolves around two at most.
The US dollar index measuring the USD strength against a basket of six major currencies was little moved, ticking around 94.00.
AUDUSD trades now around 0.75774, while EURUSD hovers above 1.17255.
GBP in Narrow Range
GBP seems to have got into a narrow range today as the UK’s government borrowing data for October came in a little bit higher than expected. However, this was set off against the downward revision to the September amount, BBH researchers explain.
Investors are looking forward to the autumn budget announcement in Hammond’s pipeline for tomorrow tracking latest developments with the Brexit. A number of reports suggest that the UK Cabinet supported PM May’s doubling its financial offer, while others highlight that she will only accept that post Brexit, and EU citizens residing in the UK will benefit from the protection of the EU Court of Justice.
No reports about the Irish border. What lies ahead for Ireland? Rumour has it that the Irish border sensitive issue will be addressed in a new trade agreement. The good old principle of ‘divide and conquer’ did not exactly prove successful in Brexit negotiations. With politics on tap and pushed in the narrow area, GBPUSD trades now around 1.132580-1. Support is to be expected at 1.3236 (S1) 1.3215 (S2), 1.31193 (S3).