Aussie Continues on a Downward Spiral

Australian Dollar:

The Aussie continued to lose ground across the board yesterday as civil unrest throughout Hong Kong seemed to curb demand for the higher yielding currency. Furthermore, statements released from the RBNZ during the previous day reporting the largest sale of NZD in the past 7 years seemed to also contribute a sharp drop in the AUD/USD intraday. As the AUD struggled to recover losses which were incurred throughout the entirety of last week, the first trading session of the week did no favours for the local currency, with the persistent downward trend seeing the AUD/USD cross reach a 9 month low of 0.8679. With today’s economic calendar for the Aussie being free of data all eyes will be on the Chinese Manufacturing PMI. The AUD opens weaker this morning buying 0.8718 U.S. cents.

• We expect a range today of 0.8680 - 0.8760

New Zealand Dollar:

The Kiwi plummeted over 150 points against the greenback yesterday after the Reserve Bank released a statement outlining that in August they had sold off the largest amount of NZD since 2007.  Almost immediately after this announcement confidence in the NZD waned, devaluing against all G10 growth currencies, and reaching lows of 0.7705 while trading within a 163 point range.  In addition, although the announcement did have a substantial impact on the local currency, the report itself is not anything new to the market as it reiterates previous statements made from the RBNZ pertaining to the currency being overvalued, unjustifiable, and unsustainable. Moving forward, NAB Business Confidence index is scheduled on the economic calendar for the Kiwi today, and should look to have quite a significant impact on the local currency as traders look to business sentiment for early signals of expected economic activity. The NZD opens lower today at NZD/USD0.7766

• We expect a range today of 0.7715 – 0.7785

Great British Pound:

The Cable had a relatively lacklustre session yesterday and traded sideways for most the day within a familiar range of 64points. With minor local data releases such as Net Lending to Individuals and Mortgage approvals failing to have a significant impact on the Pound Sterling, we saw the local currency find support at the 1.6200 level. Traders will be looking to GDP figures being published later today and more so the Current Account report. This will help give the sterling direction as economic activity and the difference between the nations imported and exported goods will have a direct link to currency demand. The local currency opens today virtually unchanged at GBP/USD1.624.

• We expect a range today of 1.8645 - 1.8795

Majors:

In what was a relatively quiet night for broader currency markets we continued to witness strong demand for the world’s reserve currency as investors continue to speculate that policy makers will at some point be finally exit the stimulus game. The dollar overnight reached six-month highs alongside emerging-market currencies due to this speculation, underpinning the likeliness for the Fed Reserve to raise interest rates for the first time in 10 years. With volatility levels remaining relatively light, the Dollar Yen opens stronger this morning at 109.46, and the EUR/USD opens marginally lower at 1.2689 due to ongoing deflationary concerns for the Eurozone combined with the positive outlook for the current U.S economic condition.

Data releases:

• AUD: Private Sector Credit m/m
• NZD: Building Consents m/m, ANZ Business Confidence
• JPY: Household Spending y/y, Unemployment Rate, Prelim Industrial Production m/m, Retails Sales y/y, Average Cash Earnings y/y, Housing Starts y/y
• GBP: GFK Consumers Confidence, Nationwide HPI m/m, Current Account, Final GDP q/q, Prelim Business Investment q/q, Index of Services 3m/3m, Revised Business Investment q/q, MPC Member Miles Speaks
• EUR: German Retails Sales m/m, French Consumer Spending m/m, German Unemployment Change, Italian Monthly Unemployment Rate, CPI Flash Estimate y/y, Core CPI Flash Estimate y/y, Unemployment Rate, Italian Prelim CPI m/m
• USD: S&P/CS Composite-20HPI y/y, Chicago PMI, CB Consumer Confidence