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NZD/USD Fundamental Analysis – November 26, 2015 - Forecast

The NZD/USD  gained 25 points to trade at 0.6580 as the greenback gave up some of its gains. Traders went running for cover on Tuesday after the incident between Turkey and Russia sparked a run on safe havens. The gain in oil prices helped a commodities rally which in turn supported the kiwi. In New Zealand today, the country's largest exporter, Fonterra Cooperative Group, holds its annual meeting of shareholders in Waitoa, Waikato, and the Reserve Bank releases monthly data on high debt mortgage lending.

The dollar fell while the Japanese yen and Swiss franc edged higher Tuesday, as investors sought shelter in traditional safe haven currencies after Turkey shot down a Russian jet fighter, raising fears of a confrontation between the two countries.

Volume will likely become more subdued as the market heads toward Thanksgiving Day on Thursday. Trading will close for the holiday and reopen for a half-day on Friday.

AUD/USD Fundamental Analysis – November 26, 2015 - Forecast

The AUD/USD gained 16 points while the US dollar declined 22 points pushing the Aussie to 0.7272. A dip on construction work limited the gains of the Aussie. Construction work done in Australia has fallen faster than expected in the September quarter as engineering work dries up amid the mining investment bust.

But residential building has lifted to a record high level, as low interest rates continue to buoy construction in the sector.

Data from the Australian Bureau of Statistics showed total construction work for the three months to September decreased 3.6 per cent to $49.04 billion, on a seasonally adjusted basis, showing a faster-than-expected deterioration compared to economist forecasts of a 2 per cent drop. The fresh data reveals construction work is 3.7 per cent lower than at the same time a year ago.

Also on Wednesday, the government noted that skilled vacancies were up 0.6 percent on month in October after rising a downwardly revised 1.1 percent in September. Consumer confidence in the U.S. has unexpectedly seen a substantial deterioration in the month of November, the Conference Board revealed in a report on Tuesday.

The Conference Board said its consumer confidence index tumbled to 90.4 in November from an upwardly revised 99.1 in October.  Data weighed heavily on the AUD in the morning session.

EUR/JPY Fundamental Analysis – November 26, 2015 - Forecast

The EUR/JPY is trading at 130.52 as the yen eased as safe haven trades backed off and the Japanese yen reacted to comments from the BoJ monetary policy minutes released this morning.  The minutes from the Bank of Japan's October 30 meeting have just been released and, in short, it seems the central bank appeared more keen to maintain stability rather than shake things up.

Leading into that meeting, expectations were high that the BoJ would expand the size of its asset purchase programme from its current pace of Y80tn a year. But policymakers held fire, and did so again at another meeting this month.

The BoJ said "the underlying trend in inflation had been improving steadily, judging from developments in the output gap and inflation expectations", but added "most members concurred that, as for monetary policy for the immediate future, it was important for the Bank to maintain and steadily pursue the current policy."

Policymakers noted there were some positives about the domestic economy, including a resilient consumer and an improving labour market. That presented a reason for holding off on extra stimulus in October. But some areas, like exports and industrial production were just treading water. Furthermore, the Bank noted that developments in overseas economies were skewed to the downside.

President Barack Obama and French President Fran├žois Hollande held a joint news conference around midday to discuss the response to the Paris terror attacks.

The joint statement “alleviated in part any lingering concerns regarding the West’s reaction to terrorist events” which, along with the jump in oil prices in a week otherwise marked by low trading volumes, helped push the market higher, said Michael Arone, chief investment strategist at State Street Global Advisors.

USD/JPY Fundamental Analysis – November 26, 2015 - Forecast

The USD/JPY dipped 20 points as the greenback weakened and the yen gained a bit of momentum on safe haven trades and comments from the BoJ in this morning’s minute’s release. The USDJPY is trading at 122.32.  The buck was recently down 0.2% against the Swiss franc at 1.0165, while losing 0.3% versus the Japanese yen to ¥122.50. The Wall Street Journal Dollar Index, which measures the greenback against a basket of 16 currencies, was down 0.2% at 90.34.

Turkish F-16s shot down a Russian jet fighter along the Syrian border on Tuesday, the first time since 1952 that a North Atlantic Treaty Organization member has shot down a Russian plane. The news pushed investors to take profit in recent dollar gains and shift funds into currencies like the yen and Swiss franc, which some market participants believe will outperform other assets in times of geopolitical or financial uncertainty.

Rising tensions between Russia and Turkey could hurt the dollar by making markets more volatile and reducing the chances that the Federal Reserve will raise interest rates next month, analysts at Commonwealth Foreign Exchange said in a note to clients. Higher rates boost the dollar’s value buy making it more attractive to yield-seeking investors.

EUR/GBP Fundamental Analysis – November 26, 2015 - Forecast

The EUR/GBP dipped 28 points to trade at 0.7028 as the euro tanked today as traders prepare for a massive stimulus program from the ECB and fallout from the economic effects of terror in Paris and Belgium continue to stress the euro.  George Osborne is to set out government spending plans up to 2020 later, which will include billions of pounds in cuts but also new money for house building.

The Autumn Statement and Spending Review will detail £20bn of cuts to Whitehall budgets and £12bn to welfare. But the chancellor will pledge almost £7bn to make house building a priority, with more than 400,000 "affordable homes" to be built in England.

Today, there are few eco data in Europe but the calendar in the US is well packed. Several eco releases are published earlier ahead of Thanksgiving/Black Friday.

The soft ECB stance pushed EUR/GBP lower in the longstanding sideways range. The pair cleared the 0.7196 support after the October FOMC meeting. A retest occurred after a soft BoE inflation report, but the test was rejected. We maintain a sell‐on‐upticks approach for EUR/GBP as euro weakness prevails. Next key support is this year’s low at 0.6936

USD/CAD Fundamental Analysis – November 26, 2015 - Forecast

The USD/CAD added 19 points as the greenback rallied and gold and oil declined weighing on the Loonie which is trading at 1.3324. The moment may finally be approaching: when the Federal Reserve begins the next stage of its policy normalization process and raises interest rates for the first time in almost a decade. Without mincing words, the process of the December rate hike being priced into markets has been nothing but the most significant tailwind for the US Dollar in recent weeks.

The greenback has rallied against its major peers on the chances of a small increase in borrowing costs in December, a prospect boosted by comments from Fed officials including its chief Janet Yellen.

The Canadian dollar continued to fall versus the U.S. dollar. The USD was off to a roaring start to the trading day as the USD/CAD broke through the 1.33.20 price level and climbed as high as 1.3350 before the CAD got as markets eased.

Investors are confident that the U.S. Federal Reserve will finally raise rates for the first time in a decade at the end of the December Federal Open Market Committee meeting. The expectations of an interest rate divergence have boosted the USD ever since the tapering of American easing was announced. The October FOMC statement sparked the possibility that the central bank policy makers would follow through after the disappointments in June and September. A strong NFP and encouraging comments from Fed members followed. The path to the first rate hike seems clear and only next week’s non-farm payrolls report could potentially derail, but probability is low.

GBP/USD Fundamental Analysis – November 26, 2015 - Forecast

The GBP/USD eased 20 points to 1.5062 as the US dollar surged today. The Bank of England’s Mark Carney announced that the interest rate for the country will remain low for some time. The Bank’s economist Haldane announced that the risk balance for the UK economy and inflation is skewed downwards. The pound/dollar has fallen to 1.5054.

George Osborne will announce big cuts in spending for the police, social care, local government, further education, renewable energy and welfare as he is forced to finally spell out how he plans to have reduced spending in key government departments cumulatively by nearly 50% since the Conservatives came to power in 2010.

After weeks of media focus on protected Whitehall departments, the chancellor will detail how the cuts will fall across the rest of government departments.

The shadow chancellor, John McDonnell, said Osborne had no more excuses left after five years. Stealing Osborne’s security theme, he added: “The cuts are putting people’s livelihoods at risk.”

Ministers have pledged to cut annual welfare spending by £12bn, and government departments have been asked to find a total of £20bn in savings under plans to achieve a £10bn budget surplus by 2019-2020. The chancellor also hopes to raise £5bn with a crackdown on tax avoidance.


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