AUD steady in face of softening economic expansion

Australian Dollar:

The Australian dollar clung to support holding marginally above the psychological 0.70 cent barrier through much of trade yesterday despite a decline in retail sales throughout July. Macroeconomic indicators have added little to support to the flailing AUD this week as the currency continues to set new 6 year lows. As risk drives direction it seems markets are set in defending current levels with strong support forming in the wake easing risk aversion. China the root/source of much of the current turmoil and volatility enjoys an extended 4 day weekend in observance of Victory Day; with the stocks closed attention turn back to key U.S employment data for direction into the weekly close. A strong NFP print above 230,000 could reignite calls for a September rate adjustment adding additional bearish pressure to an already vulnerable Aussie dollar.   

• We expect a range today of 0.6910 – 0.7150

New Zealand Dollar:

The New Zealand dollar edged higher through trade on Wednesday bolstered by a Euro sell off amidst a cloudier European Monetary Union economic outlook. The prospect of additional quantitative easing saw investors dump the 19 nation combined unit and the NZD became, at least a short term benefactor, bouncing through 0.64 U.S cents before resistance took hold and arrested any further appreciation. With Chinese markets closed for the Observance of Victory long weekend risk aversion eased and attentions turn to key U.S labour market numbers for direction into the weekly close.

• We expect a range today of 0.6310 – 0.6450

Great British Pound:

The Great British Pound edged back below 1.53 through trade on Thursday following a decline in service sector growth and stronger than anticipated US macroeconomic numbers. Growth within the services industry eased for the 2nd consecutive month while the US trade balance shrank and its own services sector expanded faster than anticipated, highlighting the difference in wider economic performance and fuelling support for a US interest rate adjustment at a time when investors are pushing back expectations of a Bank of England policy amendment. With little domestic data on hand today attentions turn to the US docket and monthly Non-farm payroll numbers for direction into the weekend.

• We expect a range today of 2.1525 – 2.1925

Majors:

The U.S dollar recouped much of the week’s earlier losses when the Euro tumbled more than 1 percent in the wake of amendments to European Central Bank inflation and growth expectations. A dovish Mario Draghi lowered the ECB’s forecast for economic expansion and increasing price pressures referring to a slowdown in global growth, in particular through developing and emerging markets, and a dampening of commodity prices. The President of the European Central Bank reiterated the board’s commitment to quantitative easing suggesting additional monetary support would be proffered if needed. The prospect of an extended QE program and dire economic forecast spooked investors prompting a swift and rapid mark down in EUR/USD. The 19 nation combined unit plunged 125points and opens this morning at 1.1122. The Greenback found support against other major counterparts on the back of a stronger than anticipated services sector expansion and a shrinking trade balance bolstered by an increase in exports. The stronger data fuels calls for Federal Reserve action but with inflation stubbornly below the Banks 2% marker and global financial stability wavering the chances of an adjustment later this month continue to thin. Attentions turn today to employment data and non-farm payroll numbers for direction into the Labour Day long weekend.  

Data releases:

• AUD: No Data
• NZD: No Data
• JPY: Average Cash Earning y/y
• GBP: No Data
• EUR: Retail PMI, Revised GDP q/q and German Factory orders m/m.
• USD: FOMC Member Lacker Speaks, Average Hourly Earnings m/m, Non-Farm Employment Change and Unemployment Rate.