Policy makers look past recent turmoil

Australian Dollar:

Having traded between a wild three cent range when valued against its US Counterpart last week, the Australian dollar open this morning on more steady footing as it currently buys 71.65 US Cents. During a period of heightened volatility investors are looking towards a more fundamentally market driven window as economic flows from within the US still suggest a high probability that interest rates will rise in September for the first time in nine years. Should broader measures of sentiment stabilise over the coming its expected ranges that ranges between 0.7000 – 0.7250 should be well contained. In an otherwise light economic calendar today, the RBA’s rate statement tomorrow promises to provide the Aussie first major hurdle of the week.

• We expect a range today of 0.7100 – 0.7220

New Zealand Dollar:

The New Zealand dollar opens the new week still vulnerable to further downside moves should the world’s reserve currency maintain its upward trajectory. Following a central bank conference overnight on Friday where policy makers re-affirmed that the door still remains open to hike rates in September, there were also some efforts made to downplay the magnitude of the markets most recent bout of volatility. Opening lower this morning, square in between last week’s four cent trading band at a rate of 0.6452, July building consents along with household credit numbers should keep market participants engaged during the domestic session which lies ahead.  

• We expect a range today of 0.6410 – 0.6510

Great British Pound:

Touching its lowest point since the 8th of July, the Great British Pound appeared on shaky ground when valued against its US Counterpart last week, particularly in the context of improved global risk flows. Whilst data on Friday confirmed England’s economy had expanded by 0.7 percent during the second quarter of this year, a number in line with consensus forecast, the markets shift back into the worlds reserve currency hurt the Sterling during the latter parts of the week that was. Opening lower against the Greenback this morning at 1.5385, the Sterling is lower also against the Aussie (2.1453) whilst steady against the Kiwi (2.3807).

• We expect a range today of 2.1380 – 2.1510

Majors:

The US Dollar Index, a measure of the Greenback versus a basket of currencies, touched its highest level in eight days overnight on Friday. Bolstering demand for the US dollar, policy makers who attended the annual Economic Symposium at Jackson Hole delivered a widely consistent message suggesting that the markets recent turmoil would not necessarily result in a deviation from a policy perspective. Commentating also on inflation which has remained stubbornly low during a period of record stimulus, it’s believed the forces holding down inflation should dissipate further in line with recoveries which are gaining momentum across the key geographies of the United States and the UK. Following the choppiest market conditions witnessed since the GFC over the past fortnight, investors are looking towards a week dominated by headline economic data, a week it’s hoped will re-affirm and provide enhanced clarity over near-term interest rate trajectories.  Stronger virtually across the board the Greenback has advanced when valued against both the euro (1.1180) and the Yen (121.696)

Data releases

• AUD: No data today  
• NZD: Building Consents, ANZ Business Confidence,   
• JPY: No data today
• GBP: Bank Holiday
• EUR: CPI Flash Estimate y/y, Core CPI Flash Estimate y/y
• USD: Chicago PMI