AUD steady in face of softening economic expansion


Australian Dollar:

The Australian dollar maintained a relatively tight trading band through Wednesday despite widespread volatility and softening economic growth. Second quarter GDP numbers printed well below expectations and highlighted the dampening effect of falling commodity prices and only moderate global economic growth. The Australian dollar edged through the psychological 0.70 barrier before investors stepped in to defend the point of technical support. Touching intraday lows of 0.6971 the AUD is still vulnerable to a deeper downward correction as risk plays continue to drive direction. While policy makers in China are expected to step in and control speculation on Forward currency markets, lending some stability the pressure certainly remains to the downside and with little support below 0.70 a significant move lower could prompt an ugly and rapid selloff. Attentions today turn to Retails Sales and Trade Balance numbers for domestic direction.   

  • We expect a range today of 0.6950 – 0.7150

 

New Zealand Dollar:

The New Zealand dollar clung to a tight trading bracket through trade on Wednesday bouncing between intraday lows of 0.6318 and session highs at 0.6368. Under pressure after stable employment data kept talk of a September US monetary policy amendment on the table. The Kiwi will continue to face mounting bearish pressures as vulnerable commodity prices, heightened risk appetite and a slowdown in China dampen demand for risk. Attentions turn off shore as investors monitor positions into the end of the week and key U.S non-farm payroll numbers.

  • We expect a range today of 0.6290 – 0.6390

 

Great British Pound:

The Great British Pound enjoyed a mixed session touching near three month lows at 1.5261 before finding support and bouncing back through 1.5300. Investors extended the timeline of expectation surrounding Bank of England policy amendments with analyst predicting borrowing costs will remain accommodative well into 2016. The risk associated with a slowdown in global growth driven by concerns the world’s second largest economy is stagnating have waylaid plans to hike interest rates as inflation will likely remain muted. Attentions turn to Services data for macroeconomic direction through Thursday.

  • We expect a range today of 2.1525 – 2.2025 

 

Majors:

The U.S Dollar rebounded through trade on Wednesday pivoting higher as revised employment data remained steady and global equities stabilised. The Dollar index measuring the Greenback against a basket of 6 major counterparts rallied 0.5% as the rush to reverse carry trade plays eased. Preliminary Non-Farm payroll numbers printed above July’s soft 177K read while workforce productivity advanced at its fastest pace in 18 months adding support to calls for the Fed to amend borrowing rates when it meets later this month. Markets however remain hugely volatile as China’s economy continues to show signs of a deeper slowdown and global economic growth remains stagnant. China has created a highly sensitive risk driven environment forcing investors to seek safety in haven assets such as the JPY and CHF. The Euro edged back below 1.13 Wednesday and attentions now turn to the ECB and its monthly rate statement and monetary policy announcement.  


Data releases:

  • AUD: AIG Services Index, Retail Sales and Trade Balance
  • NZD: No Data
  • JPY: No Data
  • GBP:Services PMI
  • EUR: Spanish, Italian, French, German and EMU Services PMI, EMU Retail Sales, Spanish and French 10 Year Bond Auctions and ECB Rate announcement and Press Conference.
  • USD: Challenger Job Cuts y/y,Trade Balance, Unemployment Claims, Services PMI and ISM Non-Manufacturing PMI. 

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