USD rallies as Yellen adopts hawkish tone

Australian Dollar:

The Australian Dollar was remarkably resilient drifting marginally lower in the face of a Greenback rally Friday. Investors looked to sell Euro and Yen in the wake of the Jackson Hole Economic Symposium as the divergence in Central Bank policies widened with the AUD a benefactor as a carry trade option. The Aussie seems caught within a relatively narrow trading band again as it seeks a catalyst to break outside recent ranges. With little on the economic docket Monday and a relatively quiet week ahead there is not much to test these bands and direction will most likely come from offshore stimuli. The dollar opens marginally lower this morning buying 0.9287 U.S cents.  

• We expect a range today between 0.9220 – 0.9330

New Zealand Dollar:

The New Zealand dollar moved lower to close the week as investor’s added support to the recent Greenback rally. The Jackson Hole Economic Symposium and conclave of global Central Bank heads dominated the economic docket and demanded the majority of the Market’s attention. A somewhat hawkish Janet Yellen (U.S Federal Reserve President) boosted U.S monetary policy expectations forcing the Kiwi back below the 0.84 handle. With a very quiet calendar ahead trading Monday will likely be subdued as investors look to Tuesday’s trade balance numbers for further direction. Kiwi opens this morning at 0.8390.

• We expect a range between 0.8330 – 0.8430

Great British Pound:

Sterling drifted marginally lower through trading on Friday as investors jumped on Fed Chair, Janet Yellen’s upbeat address at the Economic Symposium in Jackson Hole. The Great British Pound has fallen dramatically of late as the gap or divergence in Central Bank monetary policy has seemingly narrowed. The Bank of England Deputy Governor Ben Broadbent made it clear the path of interest rate hikes moving forward will be gradual if the Monetary Policy Committee is to meet its mandate and dogma. With investors enjoying the August Bank Holiday weekend trading will likely be flat throughout Monday.  

• We expect a range today between 1.7720 – 1.7820

Majors:

The U.S Dollar strengthened across the board Friday marking its strongest rally against the Euro in over two years. Continuing positive data sets suggest the economic recovery is only gathering pace and Investors were keenly focused on the Federal Reserve’s Chairwoman Janet Yellen as she addressed the assembled Central Bank heads at the annual Economic Symposium in Jackson Hole. Her somewhat hawkish tone gave hope to market bulls and those backing an early adjustment to the incredibly accommodating monetary policy stance. It seems there are enough diverging stances within the FOMC to suggest a rate hike is possible early next year. In Contrast the Euro and Yen declined as Mario Draghi and Haruhiko Kuroda acknowledged that fresh stimulus packages may be deployed should inflation remain stubbornly stagnant.

Data releases

• AUD: No Data
• NZD: No Data
• JPY: No Data
• GBP: Bank Holiday
• EUR: German IFO Business Climate
• USD: New Home Sales and Flash Services PMI