Summer Slumber

Stephen Innes SPI Asset Management

The Market has tipped their hat to Thursday ECB meeting as the main event, resulting in sleepy markets across most currencies but there have been selective pockets of interest. However, given the lack of Fedspeak support or tier one US economic data the USD, for the most part, remains trading off its back foot. Nonetheless, the market has been busy analysing and given the many currency pair standoffs, are likely over analysing.Welcome to surviving the summer on a trading desk

Despite the intense focus on the this week’s ECB, it’s questionable if much will happen despite the market’s firm Asset Purchase Price ( APP) easing bias.Given the sensitivity of the market to Draghi’s comments, he will likely err on the side of caution and stir the pot as little as possible

EURO

The Euro continues to nudge higher despite the huge risk of Drahi saying little at this week’s ECB which will be construed as dovish The current market discussion suggests September ECB for even Jackson Hole will be the platform announce the APP easing. The market believes there is no coincidence in Draghi’s appearance at Jackson Hole. But the allure to get in front on a Central Bank easing bias is just too tempting for speculators to ignore, so the EURO remains bid and quickly snapped up on dips.

Australian Dollar

After rallying hard post tepid US CPI, the Aussie struggled to gain momentum after a boisterous China data dump and traders were quick to take profits. While the recent constructive price action suggests the markets want to push even higher, traders remain very caution knowing the stronger Aussie is bad news for the economy. It’s a busy week for the AUD with RBA minutes just ahead, Employment on Wednesday and the week then dotted by RBA’s Heath on Wednesday then Debelle and Bullock on Friday. If there’s an opportunity to lean against the recent currency move the RBA will have its chance.

New Zealand Dollar

It appears the USA is not the only country struggling with consumer inflation as NZD Q2 CPI printed lower than expected at 0%QoQ versus 0.2% expected. The currency tanked 50 pips in low liquidity conditions and had struggled to find it footing so far. The RBNZ has supported a cautionary view of both the economy and inflation which is coming now as a reality check to traders in the form of weaker GDP and tepid inflation

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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