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The Australian dollar ends the week in better form than at the start. It is now trading around 0.7682, after a 3 month high of 0.7686 overnight, up considerably from the week’s low of 0.7561, with the tone more positive and swinging to a “buy-the-dips” story helped by the firming iron price. Aussie fundamentals appear to be still a little mixed but jobs data released yesterday showed a further increase in vacancies, and this more positive tone should carry the AUD to threaten 0.7700 over the next few days. However US data next week will be critical to future direction and it will be hard for the AUD to extend much beyond the 0.7700 level ahead of the US Non-farm payroll figure next Friday.

We still stand by our comment that in the longer term the higher projected US interest rate path will  chip away at AUD strength and look for a move  back around 0.7300-0.7350 in 3 months.

New Zealand
The New Zealand dollar has had a choppy week, ranging between 0.7342-0.7252, has managed to claw back over the 0.7300 level.  It’s currently sitting around 0.7306 but is making heavy work of advances above the 0.7295 level, look for consolidation around current levels to end the week. Next along with the July 4th holiday on Tuesday in the US will bring a major data dump of important US economic figures, culminating in the Non-farm payroll next Friday. If these figures are solid, showing the US economy continuing to recover, this will be supportive of the current Fed course to gradually increase rates and will therefore may keep the NZD on the defensive and a move back towards a test of the 0.7250 support  level is likely.

United States
US markets were volatile overnight as a shift in tone from central banks in Europe and the U.S. continued to drive financial markets, with stocks and bonds selling off. US equities suffered the largest drop in 7 weeks as technology stocks took a hit. In currency markets nearly all majors were higher against the USD. With the US Fed initially having taken the lead, there is now increasing evidence that other central banks, BoE and ECB in particular, seem intent on raising interest rates amid signs that the global economy is picking up steam, signalling the start of the end to nine years of stimulus.  US GDP data out last night saw Q1 revised upwards from 1.2% to 1.4%, but next week’s data will be crucial to continue the story of the US economic recovery remaining intact. We have June ISM manufacturing data, jobless claims, ADP employment change, factory orders and Non-farm payroll on Friday. Expectations are around 183K new jobs for June. The USD was lower against both the USD and EUR as acceptance by the heads of the UK and European central banks that tighter monetary policy may be appropriate in the not too distant future is once again supported those currencies this morning, with the euro having hit fresh 13-month highs against the dollar and the pound rising above 1.30 briefly, against the USD.

United Kingdom
The GBP ended the week on more positive note, shrugging off Brexit woes and political instability, buoyed by comments on Wednesday, from BOE Governor Carney who raised the prospect of rate hikes, warning that there’s a limit to the bank’s patience with above-trend inflation. The BoE Governor commented that higher interest rates will be “necessary” if the global recovery spurs an investment revival and leads to stronger wage growth and that there were signs that the recent period of weak investment growth was coming to an end. He said the global recovery had started to become “broad-based” creating “the possibility of a self-reinforcing revival in investment”. The GBP broke through resistance at 1.2900 and is now at 1.3020, well up from the weekly low of 1.2706 seen on Monday. Resistance at 1.3047 should hold well into next week, immediate support is at 1.2950/55, a break of which would target 1.2910/20. Given the big moves over the last 2-3 days and the US data releases next week we look for consolidation around current levels over the next two days.

Choppy trading for the EUR this week, mainly initiated on comments from the central bank over the week. Initially the ECB comments were dovish and seen as dashing hopes of rate hike expectations which saw the EUR lower against the USD to 1.1171. However the EUR rallied strongly on Tuesday night breaking through the 1.1300 level after the ECB said its comments had been misinterpreted and further hawkish comments on rates by ECB President Draghi saw the EUR climb to 1.1435. The EUR was further boosted by last night’s preliminary release of German CPI showing that prices are expected to rise at an annualized pace of 1.6% and 0.2% m-o-m, the EUR made fresh yearly highs around 1.1445. It now looks a little overbought given the level it has come from over a short time span, but immediate support at 1.1380  should hold going into next week.

The JPY has had a good week trading up from a low of 111.17 at the beginning of the week to a month and half high at 112.92. It is now back around 111.90. Data releases have been mixed with unemployment rate rise above expectations, but industrial production figures on target, but CPI data coming in flat against expectations of a rise. Support is currently around 111.60 and resistance at 112.45 we expect this range to hold as we head into next week.

The CAD has had a positive week, on slightly firmer oil prices and comments around interest rates by the Canadian central bank. The Bank of Canada (BoC) Deputy Governor Carolyn Wilkins on a routing speech put the end of easing firmly on the table. This was followed by Governor Stephen Poloz a day later to reiterate the message. The head of the BoC has hammered the message this week, that the rate cuts have done their job, but tried to not too much emphasis on a rate hike with the upcoming July monetary policy meeting. The USD/Cad rate has gone from 1.3259 at the beginning of the week to its current level around 1.2975.

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