It is a tough time to be holding petro-currencies.
It seems that the Fed’s FOMC meeting move of a 25 basis point rate hike – the first such rise since 2006 – has traders focused on continued US Dollar strength. That means weakness in US Dollar denominated products such as Crude Oil, which witnessed a further 2.7% drop in WTI Crude prices on Thursday.
And, of course, further weakness in two of the wider traded ‘petro-currencies’ whose fortunes are typically tied to the price of oil, the Canadian Dollar (or Loonie) and the Australian Dollar. Each of those currencies, which were both already at multi-year lows versus the USD, plunged even further on Thursday, each down about 1.5% versus the Dollar.
The Canadian Dollar scratched the USD $0.71 level or the first time since 2004 on Thursday before rallying a little to sit at 71.5 US cents at the time of writing, while the Aussie actually crossed below the 71 cent mark for a while, trading at 71.06 cents US as of the time of writing.
Summing up today’s trading, we have comments from Saxo Bank’s Head of FX Strategy John Hardy:
The USD strength broadened notably today after last night’s Federal Open Market Committee meeting, with the greenback gaining the upper hand across the board against the major currencies, and later in the session, the USD strength was more notable against the commodity currencies as risk appetite retrenched somewhat.
AUDUSD broke the 0.7150 area for the first time after multiple tries recently, a potentially key development for setting in motion a new downtrend. The FX Board trending indicator turned negative two days ago, but this is the first break of support.
Precious metals are sharply weaker as they don’t appreciate the tighter central bank theme, with gold looking to close at its lowest daily close level for the cycle today if it stays near current levels around $1,050/oz.
The Norwegian krone was on a wild ride today, as the Norges Bank’s failure to cut saw a sharp NOK appreciation, though much of that rally was later eliminated, possibly on the general weakness in the commodity theme and as the bank’s guidance suggests a high likelihood of a rate cut in the beginning of next year.
John Hardy’s full comments and analysis can be found on TradingFloor.com.