This weekend was the Annual Jackson Hole Symposium in Kansas City a significant event for global monetary policy; both for its possible indications on future policy decisions including interest rate rises and for new economic research.
Federal Reserve Chair woman Janet Yellen and Euro Central Bank President Mario Draghi spoke on Saturday. Yellen commenced the first day of the conference with a speech focusing on the labour market within the US, stating that there is still slack in the labour market even after gains in the economic recovery.
Mario Draghi’s speech called for changes to the euro zone to allow for fiscal policy to play a greater role alongside monetary policy, making comparison to both US and Japan; both where public debt was of a similar size after the economic slowdown, however Draghi claimed that the central banks in these countries could act with more fiscal power providing a backstop for government spending. He pointed out that in the Euro area unlike other major economies, the fiscal stand point is not based on a single parliament but an aggregate of 18 national budgets.
The AUD is sitting below 0.93 US cents and above 0.70 EUR cents this morning. We could see more movement after these key note speeches throughout the day as investors digested the information and were unable to act over the weekend.
Most data this week is focused on the US and Euro-zone, tonight provides the release of the German IFO, business climate and German IFO expectations, which are considered a leading indicator of economic health for the Euro-Zone GDP, positive results will provide the currency some strength, whereas a low result could cause the currency further weakness as provides indication of economic slowdown.
Overnight out of the US, we will see the data for USD Markit Composite PMI, a health indicator for the manufacturing industry, USD New home Sales and USD Durable goods another important indicator as durable goods are typically sensitive to economic changes.
This week is a very quiet week for the AUD with no significant data out until Thursday with AUD New Home Sales. Today is a Bank Holiday for the UK and an extremely quiet week out of the UK with no notable data until Friday with GBP Consumer confidence Survey for August. With no notable data out of both the UK and Australia, it’s possible that the gains the AUD made against the GBP last week will remain for this week at least until we have further data out of either currency side to provide some notable information warranting a movement in the currency pairing.