Fed Chair Powell's Keynote Speech Tonight
AUD
The AUD handed back some of the recent gains overnight, although remains significantly stronger than where we were just 1 week ago. US Equities all ending the session weaker as Fed speakers tease markets with earlier taper talks, the Dow Jones -0.5%, S&P 500 -0.4% and Nasdaq -0.6%. Commodities failed to excite with Iron Ore only taking +0.3% gains and Gold was flat on the day. In Australia today focus remains on the COVID situation, this morning Treasurer Josh Frydenberg discussed the importance of sticking to an agreed plan, to open up at 70-80 percent vaccination rates. He cited that Government support is vital in the short-term, survival in the long-term is only possible with the economy and our borders opening up. To the data, and July Retail Sales are expected this morning and some forecasters expect a 3% m/m decline as lockdowns in parts of the country weighed on spending.
USD
The AUDUSD is weaker this morning trading at 0.7243 this morning. At the Jackson Hole Symposium, Federal Reserve speakers Bullard, Kaplan and George have already spoken in favor of an imminent tapering to the US QE program. With strong inflation in the US and expected continued job growth "there is an opportunity to begin to dial back on asset purchases," George argued, with her preference being that the process of tapering start "sooner rather than later." Fed Chair Jay Powell will make his marquee speech at midnight tonight with markets are now anticipating a hawkish outcome and likely pricing in a taper timeline that could be announced as soon as the September Fed meeting. Other important data out of the US tonight includes Core PCE Price Index m/m, which differs from Core CPI in that it only measures goods and services targeted towards and consumed by individuals.
EUR
The AUDEUR is also trading lower on the day to sit at 0.6160 at time of writing. Last night's ECB Monetary Policy Meeting Accounts showed that policymakers debated forward guidance on interest rates while revealing that the pace of bond purchases would only be reviewed at the September meeting, a contrast from the pace that the Fed is moving at across the Atlantic. European Equity markets were little changed in late trade with modest losses between -0.2% and -0.4% for the FTSE, CAC and DAX at the closing bell, while the peripheral MIB and IBEX lost closer to -1.0% on the day. Earlier on Thursday, the Business Climate in Germany ticked lower in September, adding to the renewed softness observed in preliminary PMIs and the German IFO in previous sessions. The EUR like most other major currencies will be taking direction largely from Fed Powell’s speech tonight with little other data out of the Eurozone of note.
GBP
The AUDGBP managing to scrounge its way back to similar trading levels seen yesterday, trading at 0.5285 this morning. It is worth mentioning here that Britain has been reporting over 30K Coronavirus cases per day. This comes on the back of a study in the UK that protection from two doses of the Pfizer or AstraZeneca vaccines begins to wane within six months, putting increasing pressure on the Governments plan for long-term sustainability in the health system. With a bank holiday on Monday next week, it will be a slow start to the week with a handful of data releases scattered throughout the remainder, largely taking direction from the US.
NZD
The AUDNZD trading just lower through the overnight session, currently trading at 1.0423. The RBNZ has recently delivered hawkish signals, that it will start hiking in October and a 50bp move cannot be ruled out. There is encouraging news on vaccinations, which did not start until March 2021. Now, 21% of the total population is fully vaccinated, and the pace is running at over 20,000 second doses per day (roughly 0.4% of the population). Although the delta case count in NZ continues to accelerate, officials deem it to be contained.