Dollar Plummets On Policy Expectations, Aussie Lifted By Job Data, Kiwi
ActionForex | Dec 10, 2015 04:50AM ET
Dollar tumbled sharply overnight against European majors and yen. The highly anticipated Fed rate hike is already well priced in and the question is what Fed would do next year. So far, recent growth and inflation data are not supporting the case of a faster pace of tightening. And there is little chance for Fed to sound hawkish with next week's FOMC statement. Thus, traders are paring back dollar long positions ahead of next week's FOMC meeting, rather than risking caught by post FOMC selloff. Also, ECB governing council member Ewald Nowotny's comment also provided further support to Euro. In short, Nowotny noted that the pre-ECB meeting expectation was "really a massive failing of market analysts" and the central bank didn't gave a "false signal". That is, markets were wrong in anticipating the larger than expected stimulus from ECB. And the comments trigger some readjustment on expectations on the policy path of ECB next year, which might not be as aggressive as some thought.
Australian dollar is boosted strongly higher today by another month of spectacular job data. The job market expanded by 71.4k in November, much better than expectation of -10k contraction. That's even stronger than October's 56.1k growth. Full-time jobs rose 41.6k while part-time jobs rose 29.7k. Unemployment rate dropped to 5.8% versus expectation of rising from 5.9% to 6.0%, hitting an 18 month low. Participation rate also rose to 65.3%. AUD/USD is heading back to 0.738/9 resistance zone.
New Zealand dollar also strengthened as RBNZ struck a neutral tone after the expected rate cut. The OCR was lowered by 25bps to 2.50% today. RBNZ governor Graeme Wheeler said in the accompany statement that "monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target range. We expect to achieve this at current interest rate settings, although the Bank will reduce rates if circumstances warrant." Regarding exchange rate, RBNZ noted that "further depreciation would be appropriate in order to support sustainable growth."
Elsewhere, Japan BSI large manufacturing index dropped to 3.8 in Q3, domestic CGPI dropped -3.6% yoy in November. UK RICS house price balance dropped to 49 in November. SNB and BoE rate decisions are the main focus today and both are expected to keep policies unchanged. UK will release trade balance. Canada will release new housing price index and capacity utilization. US will release import price and jobless claims.
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