Geo-political concerns have been in the market over the weekend as insurgents in Iraq have taken control of the country’s second biggest city, Mosul.
The US has deployed troops to Iraq as militia group, the Islamic State of Iraq and Syria (ISIS) has expanded its territory and footage of massacres has been reaching the internet. The unrest highlights that not all is stable in the region with Syria still in civil war and not too far away in Ukraine tensions continue.
In times of unrest it is not uncommon to see funds flow into two safe-haven currencies namely the Yen and USD dollar. The Yen as we often see massive repatriation of foreign investment by the Japanese and USD as it gains appeal as the global reserve currency.
The Yen has gained over the past few days however the greenback hasn’t seen noticeable buying. In other USD related news the International Monetary Fund (IMF) has downgraded its US growth forecast by 0.8% to 2% for the year. The IMF made comments of a weak housing market and also weak international demand for US produced goods. The IMF also targeted US inflation at 2% till 2017, which may suggest that the accommodative monetary policy the Federal Reserve has had in place is still here to stay in the short-medium term.
This week is awash with information from the US Federal Reserve and its monetary policy moving forward. Expectations are for the Fed to continue to scale back Quantitative Easing efforts, however on the back of the most recent IMF report this decision may be more closely scrutinised.
The big Aussie dollar play today will be minutes from the Reserve Bank of Australia’s (RBA) most recent meeting due at 11:30am AEST. The market as always will decipher the finer details of the most recent RBA policy meeting to try and gauge what the Central Bank’s next move will be – rates up, rates down or rates on hold. The market will also review any comments the RBA makes in relation to the current health of Australia’s economy.
