Australian Dollar:
The Australian Dollar jumped higher through trade on Friday benefiting from a return in risk appetite, breaking back above 0.7050. Global growth concerns and general volatility across currency markets forced a selloff in commodity driven currencies throughout August forcing the AUD below the psychological 0.70 barrier for the first time in 6 years. As risk aversion eases attentions are drawn again toward central bank’s monetary policies and the U.S Federal Reserve takes centre stage as its Federal Open Market Committee convenes later this week in what is a much anticipated meeting and marker for future policy guidelines. With many investors anticipating the FOMC will maintain the status quo, leaving interest rates near zero, the Greenback succumb to selling pressure into the close on Friday. Today’s economic calendar is free of headline macroeconomic indicators and we anticipate the AUD will maintain a tight trading band through Monday with some upside support potential in response to moves to privatise state owned enterprises through China in a bid to increase competitiveness across manufacturing and industrial sectors. Tuesday’s RBA monetary policy meeting minutes headline the week’s domestic docket with attentions keenly focused on Wednesday and Thursday’s Fed policy meeting.
We expect a range today of 0.6930 – 0.7130
New Zealand Dollar:
The New Zealand dollar failed to recoup the losses suffered in the wake of Wednesday’s RBNZ rate amendment. The suggestion additional cuts to the OCR (Overnight Cash Rate) are required to maintain inflation and consistent economic growth have hamstrung any Kiwi advance although strong support appear to have formed on approaches toward 0.6250. We expect the NZD will maintain a tight trading band leading into this week’s all important U.S Federal Reserve monetary policy meeting wherein the divergence in policy outlooks will be highlighted and perhaps provide the catalyst for a deeper downward correction.
We expect a range today of 0.6250 – 0.6350
Great British Pound:
The Great British Pound edged higher through trade on Friday as investors unwound USD long positions on expectations the US Federal Reserve will maintain its current policy stance when it convenes later this week. Edging back through 1.54 cable took advantage of short term USD uncertainty and return in risk appetite. With little of note on the macroeconomic docket today attentions will remain squarely on Janet Yellen and her FOMC as US monetary policy expectations will steer direction through the week ahead.
We expect a range today of 2.1610 – 2.1910
Majors:
The US dollar edged lower through trade on Friday as markets position themselves ahead of this week’s all-consuming Federal Reserve monetary policy meeting. Volatility throughout August has hampered bets the FOMC will chose to increase the benchmark cash rate with just 28% of analysts pricing in a rate adjustment prompting an unwind and drawn down in USD long positions (at least in the short term). Fed officials are battling soft inflationary numbers with an ever strengthening labour market leaving many investors sidelined in search of a definitive Fed outlook or macroeconomic indicator adding further downward pressure on the world’s base currency. While subsiding volatility may give Fed officials the support needed to increase borrowing costs the return in risk appetite helped fuel a rally in commodity driven and emerging market currencies while the Euro enjoyed another run through 1.13 holding onto gains into the weekly close. With little of note on the docket today we anticipate price action will remain flippant and the Greenback will experience some downside pressure in the lead up to Federal Reserve policy announcements.
Data releases:
AUD: No Data
NZD: No Data
JPY: Revised Industrial Production m/m and Tertiary Industry Activity m/m
GBP: No Data
EUR: Industrial Production m/m
USD: No Data