Australian Dollar
Although the outcome of the Federal Reserve’s policy meeting this morning was largely in line with what markets had expected, risk appetite grew as disappointed investors sold the US Dollar. This drove the Australian Dollar higher, helped by a generally upbeat outlook on the Australian economy from new Reserve Bank of Australia (RBA) Governor Philip Lowe. The new Governor suggested that narrowly targeting inflation wasn’t something the RBA intended to do, indicating that the case for future rate cuts may have dropped slightly if the consumer price indices were not going to play such a huge role in the setting of monetary policy.
There is no Australian data left to come out this week.
Sterling
AUD/GBP found resistance after the text of a speech from a Bank of England (BoE) policymaker was accidentally released during the embargo period. In the 20-page long delivery from Kristen Forbes, the Monetary Policy Committee (MPC) member observed that the vote for Brexit had caused less volatility than expected. Importantly, she commented that she ‘was not yet convinced’ that further monetary stimulus was needed to combat the fallout from the referendum, reducing the odds of an interest rate cut in November’s policy meeting.
The UK’s data calendar remains empty going into the weekend.
Euro
The Euro posted some minor losses yesterday, but the calibre of gains made far outweighed negative movements. The latest Economic Bulletin from the European Central Bank (ECB) suggested that the outlook for inflation in the currency bloc remained fairly unchanged in the long-term. The bank remained confident that the current level of stimulus measures were effective, lessening the odds of further policy loosening.
A slew of Markit PMIs could cause significant Euro movement today, with forecasts overall suggesting a marginal weakening of the indices for France, Germany and the Eurozone.
US Dollar
The Federal Reserve left interest rates on hold at yesterday’s policy meeting and delivered something of the ‘hawkish hold’ markets had been looking for. Fed Chair Janet Yellen remained slightly more dovish than markets had expected and the US Dollar weakened while riskier markets advanced. Although three policymakers dissented in order to vote for a rate hike, three others saw no cause for a hike during 2016. This suggested that an interest rate hike in December would only pass by a small majority, if at all, rather than a more unanimous decision. This could weigh on the outlook for interest rates in 2017 and suggest that a December hike will still not necessarily mark a return to a steady tightening cycle for US monetary policy.
The Markit manufacturing PMI for September is due out in preliminary form today and is expected to hold steady at 52.
Canadian Dollar
The Canadian Dollar was largely in positive territory yesterday, buoyed by two positive factors affecting the oil markets. Firstly, UK crude oil inventories posted huge declines, pointing to higher demand, which would go a way towards counteracting the flooded oil markets. Secondly, there were comments from Russian officials that the country was ready to take steps to cap outputs and co-ordinate its actions with other global players, likely to mean the Organization for the Petroleum Exporting Countries (OPEC). Brent Crude advanced over 2.1%, while WTI Crude made gains in the region of 2.5%.
Consumer price data for August is set for release today; core price growth is expected to slow, while non-core growth is forecast to rise.
New Zealand Dollar
New Zealand’s central bank meeting, like the Federal Reserve’s, delivered what markets had predicted, yet the New Zealand Dollar weakened in response. Interest rates were left on hold, but Reserve Bank of New Zealand (RBNZ) Governor Graeme Wheeler firmly stated that further policy easing would be necessary in the near-term. Markets are now betting on a 70% chance of a rate cut during November’s policy meeting; a rise of 14% on predictions made before the latest gathering.
There is no New Zealand data on the calendar today.
Data Released
September 23rd 18.00 EUR Markit Eurozone Composite PMI (SEP P) 52.8
September 23rd 22.30 CAD Consumer Price Index (YoY) (AUG) 1.4%
September 23rd 22.30 CAD Bank Canada Consumer Price Index Core (YoY) (AUG) 2.0%
September 23rd 23.45 USD Markit US Manufacturing PMI (SEP P) 52