During the weekend we saw data from China undermining growth and spreading concerns over the global economy. The Chinese Industrial production for August was at the lowest point since March 2009, Fixed Asset Investment for January to August period missed estimations and was lower than January-July period. Prices for commodities fell to fresh lows with the Bloomberg Commodity Index of 22 futures dropped to its lowest in six years.
As a result of the latter Australian dollar against the US dollar opened with a price gap on Monday morning and went to fresh 6-month low at 0.8983. Demand for the main exports of Australian economy is decreasing, like Iron ore and Copper and that adds to the selling pressure, we would like see more comments by RBA members for preferred lower exchange rate which would likely drive the forex couple lower. Tomorrow morning we expect the release of Monetary Policy minutes of the September 2nd meeting of RBA. Also the Assistant Governor of RBA will speak.
The main driver of this week would be the FOMC statement on Wednesday and the Scottish vote for independency on Thursday. The US dollar in the past week jumped to cap at 84.47 and then entered in consolidation mood as the EURUSD and GBPUSD bounced up on profit collection. At the moment the GBPUSD trades in tight range between 1.6277/1.6218 and is considered of very high risk as polls do not show a clear result for the Thursday referendum. That week would redefine the attitude of investors toward the sterling because we have tomorrow UK CPI data, further decline in inflation diminishes chances for BOE rate hike. Then on Wednesday Employment report and on Thursday apart the referendum we expect UK Retail Sales.
The Euro against the greenback draw a resistance line at 1.2974, general attitude towards the Euro is bearish due to dovish ECB while investors speculate for monetary tight by Fed on Wednesday. Technically the currency couple is oversold and that excuses the current sideways but we would expect negative pressure to continue. Tomorrow we look to Euro-zone ZEW Economic Sentiment which is expected to be lower in September compared to August.
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