Australian Dollar
The start of the week saw all eyes on Wednesday’s Federal Open Market Committee (FOMC) meeting. Expectations of no change to interest rates created space for commodity
correlated currencies like the Australian Dollar to advance, with the ‘Aussie’ racking up bullish gains against its peers. Further bolstering the Australian Dollar was a joint statement from Treasurer Scott Morrison and new Reserve Bank of Australia (RBA) Governor Philip Lowe. A new Governor can often unsettle investors over the questions raised about the future direction of monetary policy, however in the statement with the Treasurer the Governor noted he does not intend to drastically alter policy, nor experiment with unusual tools.
The latest RBA meeting minutes are due out today and with the suggestion that Lowe does not intend to drastically alter policy it is likely they will still hold sway with investors.
Sterling
Having tumbled before the weekend, the Pound was on a correctional rebound yesterday, significantly curbing the extent to which the Australian Dollar was able to make gains. Also helping the Pound were the latest Rightmove house price figures. Fears that the market may have experienced a strong post-Brexit shock were quickly extinguished, with monthly prices growing 0.7% and yearly price growth weakening only -0.1% to 4%. It wasn’t all rosy for the Pound, however, thanks to warnings that the financial services sector could lose its dominance if the UK leaves the European Economic Area (EEA).
The Pound could weaken significantly tomorrow, given that public sector net borrowing is likely to crash from last month’s £1.5 billion surplus to a deficit of over -£10 billion.
Euro
Bundesbank, the German central bank, warned yesterday that the German economy could have slowed in the three months to September, if recent data is any indication. Recently, weak trade and industrial statistics have cast doubts over Germany’s status as the ‘powerhouse’ of the Eurozone, with previous releases having dragged aggregate Eurozone measures down despite the presence of strong data from other members of the currency bloc. Previously, Bundesbank had predicted the German economy would continue to strengthen.
In a relatively light data week the Eurozone composite PMI on Friday will be one of the more impactful releases.
US Dollar
With little hope of an interest rate hike this month the US Dollar was left unappealing. Traders were reluctant to adjust their positions ahead of the Federal Open Market Committee’s (FOMC) meeting and there was little data to influence market sentiment. As a result, the ‘Greenback’ slumped across the board.
The FOMC announces its interest rate decision early on Thursday morning, so expect significant volatility throughout the day.
Canadian Dollar
The Canadian Dollar was largely weak yesterday, although this was due to the fact that the factors which should have positively influenced the ‘Loonie’ were more influential on many of its peers. While the Canadian Dollar did advance against the US Dollar and the Euro, its stronger commodity peers and a rebounding Pound Sterling kept it largely on the decline. Oil did advance, but towards the end of the session gains had already begun to fall back and WTI and Brent were both in a weak state overall despite the latest appreciation. Another suggestion that the Organisation for the Petroleum Exporting Countries (OPEC) were nearing a production curb helped improve oil sentiment, but that positivity failed to overly translate into the Canadian Dollar.
There is nothing particular of note on the data calendar until Friday, when the Canadian consumer price index figures will be released.
New Zealand Dollar
Although marginally weakened versus the Australian Dollar, the New Zealand Dollar was bullish across the board yesterday. As well as benefitting from the weakness in the US Dollar, the ‘Kiwi’ was also driven higher by positive domestic data. The latest Westpac measure of consumer confidence rose from 106 to 108, while the performance of services index climbed from 54.5 to 57.9.
As well as the key interest rate decision on Wednesday, markets could also see significant volatility from today’s GlobalDairyTrade auction.
Data Released
September 20th 11.30 AUD RBA Sept. Meeting Minutes
September 21st 18.30 GBP Public Sector Net Borrowing (Pounds) (AUG) -£10.4
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)