AUD Rallies on Turnbull’s Ousting, as Focus Shifts to Powell and the USD
There’s plenty for the markets to consider for the day ahead, with FED Chair Powell and the Oval Office the key areas of focus through the day. ·FX Empire
Economic data released through the Asian session this morning included July trade data out of New Zealand and July inflation figures out of Japan.
For the Kiwi Dollar, the trade deficit widened from a revised NZ$4,210m to NZ$4,440m, year-on-year, while narrowing from a revised NZ$288m deficit to a NZ$143m deficit, month-on-month, which was better than a forecasted widening to NZ$400m.
The annual trade deficit was the widest in 9-years according to Stats NZ, with the widening coming off the back of a larger rise in imports.
Annual imports rose by 13% to NZ$60.7bn, year-on-year, while exports rose by 11% to NZ$56.2bn.
The rise in imports was attributed to the imports of petroleum and petroleum products (+84%) and in mechanical machinery and equipment.
The rise in exports was attributed to the export of dairy (+21%) and meat products.
The Kiwi Dollar slipped from $0.66345 to $0.6633 upon release of the data, before rising to $0.6641 at the time of writing, up 0.06% for the morning.
For the Japanese Yen, the annual rate of core inflation held steady at 0.8%, falling short of a forecasted pickup to 0.9%.
Headline inflation picked up in July, with consumer prices rising by 0.3%, month-on-month and by 0.9%, year-on-year, which was better than a forecasted 0.4% rise, following a 0.7% rise in consumer prices in June.
Rising prices for fuel, light and water charges (+3.1%), medical care (+2%) and prices for transportation and communication (+1.5%) and food (+1.4%) contributed to the rise in prices year-on-year.
Month-on-month, prices for food (+0.6%) and prices for transportation and communication (+0.4%) contributed to the pickup in inflation, while prices for clothes and footwear (-2.4%) dragged in July.
The Japanese Yen moved from ¥111.331 to ¥111.362 against the Dollar, upon release of the figures, before easing to ¥111.4 at the time of writing, down 0.10% for the morning.
Elsewhere, the Aussie Dollar was up 0.41% to $0.7278, the bounce back coming off the back of Prime Minister Turnbull ousting and Liberal Party vote in favour of Treasurer Scott Morrison to become Prime Minister.
In the equity markets, softer than expected inflation figures saw the Japanese Yen ease back further against the Dollar, providing support for the Nikkei, which was up 0.35% at the time of writing, with the ASX200 up 0.24%, recovering from an initial sell-off on news of Prime Minister Turnbull’s ousting.
For the CSI300 and Hang Seng, there was more red, the pair down 0.34% and 0.71% respectively with the Hang Seng struggling off the back of AIA’s earnings results, while downward pressure from a lack of progress from initial trade talks between the U.S and China also weighed.
The Day Ahead:
For the EUR, it’s a quieter day on the data front, but with 2nd estimate GDP numbers for the 2nd quarter due out of Germany this morning, the EUR will likely find some direction that isn’t driven by geo-political risk factors, though there will need to be some revisions to get the markets interested.
Outside the data, updates from trade talks between the U.S and China will also influence, with the ECB joining other central banks in raising concerns over the ongoing trade war that could ultimately lead to an extension to the asset purchasing program should the global economy begin to feel the pinch.
At the time of writing, the EUR was up 0.12% to $1.1554, with the GDP numbers likely to be overshadowed by troubles on Capitol Hill.
For the Pound, stats are limited to mortgage approvals that are unlikely to have an impact on the Pound this morning, leaving the Pound in the hands of the UK government and updates on Brexit negotiations that had resumed on Tuesday.
The government’s “No Deal” publications provided a taste of what’s to come in the event of a failure to hammer out a deal, with trade being a major concern, though there were plenty of other issues that Britain and British voters would face, none of which will be considered a positive for the Pound or the Tory Party.
At the time of writing, the Pound was up 0.05% to $1.2817.
Across the Pond, economic data scheduled for release later in the day is limited to July durable goods order figures that will provide some direction for the Dollar, though we will expect FED Chair Powell’s Jackson Hole speech this afternoon to be the main event for the Dollar.
Prelim August private sector PMI numbers released on Thursday disappointed, with housing sector stats raising concerns over the state of the housing sector, both negatives for the Dollar and, when considering the FED’s need to factor in possible effects of the ongoing trade war between the U.S and China, could the great Dollar trade be about to unwind?
FED Chair Powell will likely focus on the trade war and whether there are any concerns over the U.S economy and what impact there will be on policy, the FOMC meeting minutes released on Wednesday somewhat dated when considering a series of softer economic indicators out of the U.S of late.
While the FED will be centre stage, Capitol Hill will also be of influence, Robert Mueller’s investigations and trade war chatter also there for the markets to consider through the day.
At the time of writing, the Dollar Spot Index was down 0.08% to 95.589, with FED Chair Powell and the Oval Office the key drivers through the day.
For the Loonie, there are no material stats scheduled for release through the day, Mexico and the U.S yet to come to an agreement on the final points on NAFTA, the dragging out of talks a negative for the Loonie, with little else for the markets to consider at the end of the week.
At the time of writing, the Loonie was down 0.08% to C$1.3092, with NAFTA chatter the key driver.
