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Forex: Australian Dollar Falls on Post-ISM Fed Taper Bets, Ignores RBA

Ilya Spivak

Talking Points:


  • Aussie Dollar Fell on Fed Taper Speculation, Ignoring RBA Rate Decision
  • Japanese Yen Sold as Post-ISM US Yields Rise Fuels Carry Trade Rotation
  • British Pound Unlikely to Find Volatility in November’s Construction PMI


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The Australian and New Zealand Dollars declined in overnight trade as most Asian stock exchanges declined, pulling down the sentiment-linked currencies along the way. The selloff followed a down day on Wall Street in the wake of a better-than-expected US ISM Manufacturing report that drove speculation of a relatively sooner move to “taper” the Fed’s QE3 stimulus effort. Japanese shares diverged as a post-ISM increase in US yields encouraged rotation out of USD-funded carry trades into JPY-based alternatives, weighing on the Yen and boosting the outlook for local exporters.


The Aussie was little-changed after the Reserve Bank of Australia kept the benchmark interest rate at 2.5 percent as expected and delivered a policy statement that was broadly unchanged from the prior month. While RBA Governor Glenn Stevens characterized the exchange rate as “uncomfortably high” once again, he likewise dismissed the case for renewed rate cuts, saying the effects of past easing enacted since late 2011 will continue to filter into the broad economy “for a while yet”.


November’s UK Construction PMI reading headlines a quiet European economic calendar. Expectations call for a shallow pullback to 59.0 after the index hit a record high at 59.4 in the prior month. Bank of England Governor Mark Carney and his colleagues spent much of last week arguing forcefully that the great victory of the forward-guidance policy framework adopted in August has been to disconnect economic data outcomes from policy speculation. On balance, that hints a marginal change on the PMI gauge is unlikely to offer a meaningful boost to British Pound.



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Asia Session:


GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Monetary Base End of Period (NOV)

¥191.6T

-

¥189.8T

23:50

JPY

Monetary Base (YoY) (NOV)

52.5%

-

45.8%

0:00

NZD

ANZ Commodity Price (NOV)

-0.4%

-

1.4%

0:01

GBP

BRC Sales Like-For-Like (YoY) (NOV)

0.6%

1.1%

0.8%

0:30

AUD

Current Account Balance (A$) (3Q)

-12.7B

-11.5B

-12.1B

0:30

AUD

Net Exports of GDP (3Q)

0.7

0.35

-0.04

0:30

AUD

Retail Sales s.a. (MoM) (OCT)

0.5%

0.4%

0.9%

1:00

CNY

Non-manufacturing PMI (NOV)

56.0

-

56.3

1:30

JPY

Labor Cash Earnings (YoY) (OCT)

0.1%

-

-0.2%

3:30

AUD

RBA Interest Rate Decision

2.50%

2.50%

2.50%



Euro Session:


GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

9:30

GBP

PMI Construction (NOV)

59.0

59.4

Medium

10:00

EUR

Euro-Zone PPI (YoY) (OCT)

-1.0%

-0.9%

Low

10:00

EUR

Euro-Zone PPI (MoM) (OCT)

-0.2%

0.1%

Low



Critical Levels:


CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3381

1.3471

1.3507

1.3561

1.3597

1.3651

1.3741

GBPUSD

1.6181

1.6281

1.6319

1.6381

1.6419

1.6481

1.6581



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com


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