Tumbling commodity prices kill AUD advance

Australian Dollar:

The Australian dollar again fell victim to softer commodity prices through trade on Monday while investors looked to adjust USD positions in anticipation of a strong non-farm payroll print on Friday. The AUD eased below 0.73 touching intraday lows of 0.7259 as Bloomberg’s commodity index plummeted to a 13 year low and Chinese factory orders fell. With commodity prices are driving direction attentions turn domestically to retails sales and trade balance reports as the key macroeconomic indicators while the RBA rate statement will be closely scrutinised as investors seek insight into a possible shift toward looser monetary policy.

We expect a range today of 0.7180 – 0.7355

New Zealand Dollar:

Much likes its antipodean cousin the New Zealand dollar fell victim to lower commodity prices and an upbeat US labour market outlook on Monday. The Kiwi gave back all gains enjoyed through Friday moving back through 0.66 and touching intraday lows of 0.6546 before technical supports offered some resistance to the downward drive. Commodity currencies are likely remain under some stress while the price of key exports continue to fall and attentions today turn to the ANZ’s commodity price index as a marker of export performance.

We expect a range today of 0.6510 – 0.6710

Great British Pound:

The Great British Pound eased lower Monday having failed to hang onto the 1.56 handle as investors looked to bolster USD net positions ahead of what is expected to be an upbeat labour market print on Friday. Domestic manufacturing PMI surpassed market expectations and expanded a faster pace throughout July supporting calls for a Bank of England policy adjustment come quarter two next year. With monetary policy driving direction investors seem reluctant to step outside recent ranges ahead of Thursday’s key BoE rate announcement and official MPC vote breakdown and Cable opens this morning at 1.5576.

We expect a range today of 2.1350 – 2.1600

Majors:

Despite a reduction in consumer spending and manufacturing slowdown the U.S Dollar pared much of the losses suffered through trade on Friday as investors began correcting positions ahead of what is expected to be another strong Non-Farm Payroll print. The Fed’s preferred measure of inflation, the Core PCE index, offered little to suggest price pressures will increase in the near term while personal spending and income were flat reducing analyst expectations that consumer spending will drive growth. Labour market data has become a primary indicator driving market expectations and there is a belief that a strong print will overshadow mediocre reads across other indicators namely GDP growth and inflation forcing the Fed into a cycle of tighter monetary policy.

The Euro dipped below 1.0950 touching 1.0940 when the Greek stock market plunged having reopened after a 5 week hiatus. The dip put pressure on the 19 nation shared currency although the unit found support as manufacturing performance improved throughout July.

Attentions remain squarely focused on Friday’s non-farm payroll report as the primary driver steering direction through the week ahead. An upbeat read will bolster market and investor expectations the Federal Reserve will look to normalise monetary policy possibly as soon as September.

Data releases:

AUD: Retail Sales m/m, Trade Balance, RBA Cash Rate Announcement, RBA Cash Rate Statement and Commodity Prices.
NZD: ANZ Commodity Prices
JPY: Monetary Base, Average Cash Earnings and 10 Year Bond Auction
GBP: Nationwide HPI m/m, Construction PMI and 10 Year Bond Auction
EUR: Spanish Unemployment Change and EMU PPI m/m
USD: Factory Orders m/m and IBD/TIPP Economic Optimism