Australian Dollar
After advancing on weak bets of monetary tightening from the Federal Reserve in December, the Australian Dollar managed to hold onto its gains on Friday despite the latest US data printing positively. The ‘Aussie’ weakened against the Chinese Yuan and the US Dollar, but made strong advances elsewhere. Improving confidence was a report from the Australia Institute that stated that, while certain regions would be hit hard, a government ban on new coal mines or expansions to existing ones would not have a significant negative impact upon the Australian economy.
The minutes from the latest Reserve Bank of Australia meeting are set for release tomorrow.
Sterling
Two major headwinds for the Pound allowed the Australian Dollar to make a bullish advance on Friday. Firstly, investors were concerned by the news that Deutsche Bank were to be fined US$14 billion by the US Department of Justice (DoJ) for allegedly mis-selling mortgage backed securities in the approach to the financial crisis of 2008. This created much speculation over which other banks could be fined, with many thinking the Royal Bank of Scotland, which received a £45 billion taxpayer bailout, could be in the firing line. Also weighing on the Pound was the news that EU officials continued to snub attempts to hold secret Brexit talks, meaning the UK will have to trigger Article 50 without any idea what kind of deal it is likely to be able to secure.
Wednesday’s governing borrowing figures could spark significant movement for the Pound; public sector net borrowing is predicted to crash back into deficit with a shortfall of -£8.4 billion after July’s £1.5 billion surplus.
Euro
The Euro was also unsettled by the news that Deutsche Bank were due to be fined, as well as fears of resultant tensions between the US and the EU. The bank quickly stated it would not pay such a large settlement and the German government issued comments cautioning that the US should not attempt to come down harder on the Eurozone bank than it did with domestic financial institutions. Many observers noted the timing of the fine; just a few days after EU officials ruled that US giant Apple must repay the Irish government nearly an identical sum to the Deutsche Bank fine due to unfair tax practices.
A slew of PMIs are set for release on Friday, including the French, German and Eurozone manufacturing, composite and services indices.
US Dollar
Bets that the Federal Reserve would hike rates in December continued to seesaw on Friday. After Fed Funds futures started the session showing that markets were now predicting no changes to policy at the end of the year, market expectations returned to showing expectations of a hike after the latest data was released. Inflation bettered forecasts, with both core and non-core inflation rising ten basis points above estimates, hitting 2.3% and 1.1% respectively. Considering inflation was one of the key factors cited by dovish members of the Fed in recent weeks as justifying a cautious approach to monetary policy, signals price growth is moving at an above-forecast pace bodes well for those hoping for tighter monetary policy in December.
The Federal Reserve announces its latest interest rate decision on Thursday. No changes are expected, with markets having priced in just a 15% chance of monetary tightening. The accompanying releases, such as the Summary of Economic Projections, could give strong indications as to the outlook of Fed policy until the end of the year.
Canadian Dollar
Another day without any particular momentum saw the Canadian Dollar remain soft on Friday, although strong gains were made against the tumbling Pound Sterling. The day’s data was limited in its impact, showing a significant slowdown in manufacturing shipments growth, which increased just 0.1% instead of accelerating from 0.8% to 1% as forecast. Both WTI and Brent crude oil were racking up losses over -2% thanks to the recovering US Dollar, taking WTI below US$43 per barrel.
Canadian consumer prices are due for release on Friday and could finally give the ‘Loonie’ some momentum after last week’s lacklustre movements.
New Zealand Dollar
Despite several pieces of positive data, the New Zealand Dollar was pressured lower on Friday thanks to the ascending US Dollar. The number of job advertisements posted in August more than doubled, while consumer confidence rose 2.8%, taking the index up from 117.7 to 121. In other news, the government attempted to allay fears sparked after the release of the Panama Papers that New Zealand was a tax haven by announcing anti-money laundering laws would be extended to cover additional professions, including real estate agents.
The latest Reserve Bank of New Zealand (RBNZ) monetary policy meeting is due on Thursday. No changes are expected to interest rates, but with high expectations of policy easing later in the year it is likely the RBNZ may use the meeting to signal further cuts are incoming. This would undermine the positivity generated by a rate freeze.
Data Released
September 20th 11.30 AUD RBA Sept. Meeting Minutes
September 21st 18.30 GBP Public Sector Net Borrowing (Pounds) (AUG) -£8.4
September 22nd 04.00 USD FOMC Rate Decision (Upper Bound) 0.50%
September 22nd 07.00 NZD Reserve Bank of New Zealand Rate Decision (SEP 22) 2.00%
September 23rd 18.00 EUR Markit Eurozone Composite PMI (SEP P)
September 23rd 22.30 CAD Consumer Price Index (YoY) (AUG)