The Australian Dollar has experienced a relatively quiet start to the week, trading in a range against most of the majors due to a lack of high level data out of most countries for the early part of this week.
The AUD has climbed back against the USD during the offshore session last night making it to a high back over the 87 US Cent level, which has since subsided to 86.90 US Cents at 8:00 AEST today. This could be attributed to a positive NAB Business Confidence report released out of Australia yesterday and a lack of significant data out of the US due to Veterans Day to counteract investor sentiment.
The AUD hit 100 Japanese yen overnight for the first time in 18 months. The AUD has been making gains on the JPY since the announcement by the Bank of Japan to commence their bond buying program in an attempt to stimulate their economy. The pair made it to a high of 100.68 during the offshore session.
This morning across the Tasman, New Zealand released The Reserve Bank of New Zealand Financial Stability Report, providing an insight into the banks view on inflation growth and their stance on future interest rate rises.
The position of the RBNZ is that, ‘The New Zealand Financial System remains sound and continues to operate effectively’. Graeme Wheeler commented that ‘the banking system is well capitalised, liquidity buffers are above required minima and non-performing loans continue to decline’.
The areas the RBNZ highlighted as key risk for New Zealand included the housing market imbalances, which they mentioned they are monitoring closing however are of the opinion that the risk has declined since their last report.
The report also mentioned the dairy sector as being a key risk that has increased in recent time. ‘Lower global dairy prices are in large part due to reduced demand from China, highlighting New Zealand’s vulnerability to a slowdown in the Chinese economy. Risks arise both from New Zealand’s large volume of trade with China and also from any Financial market disruption that could arise from a Chinese economic slowdown’.
We may not see the impact of this report until the offshore session as following the release of this report there appeared to be no discernible impact on the AUD NZD pairing.
Tonight, the focus will continue to be on the Banks with the Bank of England Inflation report due to be released for the UK and the Governor Mark Carney due to hold a press conference at its release in London. The report will provide the BoE’s projection for inflation and economic growth over the next 2 years and their stance on future rate rises, its release is likely to cause considerable market volatility for the AUD/GBP exchange rate.