Higher yielders remain soft

Australian Dollar:

Whilst popping its head back up above the 93 US Cents mark when valued against its US Counterpart on Friday, overall it was a week to forget for the higher yielding asset which lost around 1 US cent during a period dominated by heightened volatility and broader risk aversion. In a move which favoured US treasuries and the US dollar the Aussie appears set for another busy week with the big ticket item coming on Tuesday when The Reserve Bank meet to discuss existing Monetary Policy settings. Opening this morning stronger at a rate of 0.9307 retail sales data today will be the focal point when released at 11:30 am AEST.

We expect a range today of 0.9280 – 0.9330

New Zealand Dollar:

The New Zealand dollar managed to recoup some of its recent losses, rebounding back above 0.85 to close out the trading session. In a week heavy with key US risk events softer than expected US Non-Farm Payroll numbers disappointed investors late Friday and prompted a Greenback sell off as markets adjusted their interest rate expectations. The Kiwi has suffered a remarkable fall from grace over the last fortnight and investors will be keenly focused on Wednesday’s unemployment data as the key directional driver on the domestic ticket this week.

We expect a range today between 0.8460 – 0.8580

Great British Pound:

The Great British Pound was sold aggressively late last week after figures on Friday showed UK Manufacturing grew at the slowest pace in a year during July with the level of new orders and output dropping notably. Given the official index slipped from 57.2 in June down to 55.4 in July investors moved away from the Sterling on Friday selling the currency from an earlier high of 1.6891 down to a low of 1.6810. Lower against the greenback this morning at a rate of 1.6829 there has also been some significant loses for the pound when valued against both the Kiwi (1.9774) and the Aussie (1.8072).

We expect a range today of 1.8040 – 1.8110

Majors:

The U.S. Dollar rally stalled late Friday as Non-Farm Payroll numbers disappointed investors falling short of expectations. The report showed the economy added some 209,000 new jobs in July well shy of the 233,000 predicted forcing markets to reassess their expectations of a Fed rate hike. The poor showing reinforces the FOMC’s perspective that there is still some slack in the labour market and is perhaps highlighted by stagnant wage growth and flat hourly earning rates. The Federal Reserve’s Open Market Committee has long placed labour market conditions as a key factor in governing future Interest Rate direction and Fridays soft data weakens investor expectations.

The Euro rebounded late Friday recovering 1.34 but remains under pressure as both Spanish and Italian Manufacturing reports failed to meet analyst expectations. In a week of disappointing inflation data the threat of deflation remains real and will continue to cap significant euro gains moving forward.

Attention now turns to a docket headlined by Manufacturing PMI and Trade Balance data as directional drivers.