Daily FX Commentary – Jeff Arcos

Overnight Interbank Range

AUDUSD              0.7088 – 0.7201

AUDEUR              0.6235 – 0.6326

AUDGBP              0.5618 – 0.5695

AUDNZD              1.0445 – 1.0505

 

Commentary

·         The Fed defied many market commentators, including President Trump, raising its Fed Funds rate target by 25bps to a range of 2.25-2.50%. Given this move was widely expected, the market was focussed on the Dot Points which were lowered across the board with the 2019 dot pointing to 2 hikes instead of 3 hikes previously. Changes was carried through to 2020 and 2021, with 1 hike still forecast in 2020.

·         The accompanying statement and press conference was less dovish than the market had been expecting sending USD higher across the board. Equities and treasuries initially whipped around but at the time of writing equities are well off, yields are lower and the curve flattening seen ahead of the decision has continued.

·         AUD is currently the weakest G10 currency of the last 24 hours. Having failed to break back above 0.72 pre Fed, it’s now trading below 0.7100 and to its lowest since November 1st. Our short term fair value model estimate for AUD/USD currently sits just below 0.70 and with the Fed out of the way and risk sentiment still sour, chances of a significant bounce into year-end look pretty slim.

·         In other news Italy and the EC have formally settled their differences on the stance of fiscal policy next year.

 

Data out tonight

·         NZ GDP and Trade Balance

·         AUS Employment change/Unemployment Rate

·         UK Bank of England Rate Decision

  Hope you are having a great trading week.   All the best from Team GMTFutures & FX