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Major Economies – 25th August 2017

Australia
In a week of little domestic data releases, the Australian dollar has been driven by offshore moves and has drifted lower after breaking below the 0.7950 support level on Tuesday, currently sitting around 0.7900 against the US unit. Of interest is that Moody’s reiterated Australia’s AAA rating with “Australia’s very high [fiscal strength] score is driven by a moderate government debt burden relative to AAA-rated peers and low cost of debt.” The dearth of economic news has left the AUD very much swinging on the waxing and waning at the mercy of the risk-off mood over the week, but the general tone is down and it looks to be back grimly hanging on to the 0.7900 mark after a run down to the 0.7865 level overnight. Read more

FX Update: The United States Dollar continues to struggle

Overview
Geopolitical risks continue to abate as concerns over North Korea take a back seat to the latest spate of terrorist attacks in Spain which have a more localised effect on financial markets. The markets  although still on edge, with South Korean/US war games beginning Monday, ended last week with a more risk-on tone and have begun the week with commodity currencies holding onto last week’s gains. U.S. stocks rallied on Friday from session lows — though they still ended the day down — after the White House released a statement that Steve Bannon would be leaving his job as chief strategist, capping a tumultuous week for the Trump administration. The rally that started after Trump’s election, the S&P 500 is still up 14% since early November — was launched on the belief that the president would cut regulations and lower taxes, boosting profits. But the embrace of Trump by investors and, until recently, CEOs, has always flown in the face of some of his other commerce-averse tendencies. Read more

Major Economies – 18th August 2017

Australia
Yesterday’s Australian July employment data was mildly positive, with unemployment steady at 5.6% although full time employment decreased by 20,000 on a seasonally adjusted basis. The Australian dollar has had a choppy couple of days ranging from 0.7806-0.7961against the USD. The employment figures pushed the AUD back over 0.7900 against the USD reaching highs in the 0.7950/60 level however it has had problems holding above the 0.7900 handle being hit overnight by the more the risk-off mood and falling equity market to drop back to 0.7880. The higher gold price has had little supportive effect. It has traded around the 0.7875/85 level for most of this morning but 0.7870 is immediate support and any break below that level will target 0.7830. Given the current risk tone we look for a test of lower levels next week. Read more

Major Economies – 11th August 2017

Australia
The move into gold as the North Korean problem heats up has helped stem Australian dollar losses as investors move away from risk assets. However the Australian dollar has shifted lower slipping below the 0.7900 mark to a low of 0.7854 against the USD. There have also been a number of other factors weighing on the Aussie, China’s July inflation was below expectations, as CPI rose 0.1%, above the previous -0.2% but below the 0.2% expected. Australian domestic data for home loans and consumer confidence were also below forecasts. 1.4% from 1.5%. With no immediate change expected on the North Korean problem we look for the safe-haven trend to remain intact at least for the next few days and the AUD will look to struggle to hold over the 0.7880 level. Immediate support is at 0.7855 then down at 0.7785.
Read more

FX Update: US jobs data helps the USD regain some composure

Overview
Equity markets climbed higher, with Asian markets back at almost 10year highs and US indices remained at record levels after a stronger than expected US jobs number. The July Non-farm payrolls figure showed that hiring was increasing with 209,000 increase, above market expectations (183K).This result brings the 3 month average to 195,000, more than enough to provide for a growing population and 8 years after the last recession, returning to employment levels from before that period. Friday’s data also showed a small drop in the unemployment rate to 4.3%, showing an economy running close to full capacity. Gains were widespread across most sectors and average hourly earnings rose, which will please the Federal Reserve and lend more weight to their ongoing tightening bias. Read more

Economies of Note

Australia
As expected the Reserve Bank of Australia left rates on hold at 1.5% on Tuesday but as expected the main interest was around the accompanying statement. The RBA noted “An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”. This suggests a stronger link between appreciation in the A$ and the RBA’s economic forecasts. Further appreciation would no longer complicate; rather it “would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.” We have thus seen a slide in the Australian dollar from a high on Tuesday at 0.8041 against the USD to a low for the week yesterday around 0.7912.  Read more

Economies of Note

Australia
We’ve seen some mixed data from Australia this week. Consumer Confidence made a good jump from 112.50 to 115.10, with the positive employment report of the previous week sighed as a factor. On the other hand we saw some soft inflation figures for the second quarter. Headline inflation came in at just 0.2% vs the expectation of 0.4%. The negative impact of the headline result was tempered by the RBA’s preferred inflation measure, the trimmed mean, which came in on expectation at 0.5%. Reserve Bank Governor Lowe was on the wires this week saying the central scenario remains for a gradual rise in underlying inflation. Read more

FX Update: The USD continues to struggle

Overview
Broad based USD weakness continued to be the main theme of last week. Political paralysis in Washington has weighed on the USD and until the market starts to believe the Trump administration can pass key legislation, it’s hard to see the United States dollar making a significant recovery. We do have the Fed Funds rate meeting this week, although it’s not expected to contain any surprises. While no change in interest rates is expected, we may get further clarity on impending balance sheet reductions from the central bank. Tighter monetary policy throughout much of the developed world is going to be the dominant trend over the coming years. The Bank of Canada recently raised interest rates for the first time in seven years, and the ECB are likely to decide later this year just when to scale back monthly bond purchases. Read more

Economies of Note

Australia
The Australian dollar has had another good week buoyed by upbeat minutes from the Reserve Bank of Australia, increasing gold and iron ore prices, and supportive local data. The RBA minutes had a definite positive tone to them noting economic data for the second quarter had generally been positive. The also highlighted improvements in the labour market and the fact that fiscal policy will be more expansionary in 2017/18 that previously thought. They said stronger infrastructure spending will have significant positive spill over to the economy. Yesterday’s employment data backed up their view with some solid figure. Although the headline gain of 14k was pretty much bang on expectation, digging into the detail showed full-time jobs grew by a whopping 62k, while part time employment declined 48k. Read more

FX Update: The USD suffers badly as data disappoints

Overview
The main theme of the past week has been broad based US dollar weakness. Dovish comments from Fed officials combined with soft US data have done the damage, but you can also add in the mix the continuation of Trump-Russia hysteria and its negative impact on the administration’s ability to push on with its policy agenda. Will this week be any different? Probably not on the political front, although there is always the chance of a data surprise. During this period of USD weakness the NZD has largely underperformed and as a result it has declined on many other crosses. The Australian dollar on the other hand has made the most of the current environment with gains across the board.  Read more