Fed Offers Mixed Signals On Interest Rate Trajectory

AUD

After some Jackson Hole-driven volatility late in Friday's session, AUD opens mixed against the majors this morning. Asian equities closed lower on Friday with the ASX -0.9%, Shanghai Comp -0.6% and Nikkei -2.1%. Commodities saw a more mixed close with Crude Oil +1.2%, Natural Gas +7.9%, Gold -0.2%, Silver +0.4%, Iron Ore -0.7% and Copper -0.2%. A quiet day for both local and Chinese data on Friday, however this week is off to a fast start with Australia’s Retail Sales m/m which is expected to climb from -0.8% to +0.2% this morning. We will also see China’s CB Leading Index m/m with a previous reading of 0.1% and no forecasts, it is unlikely to spark any major movement. A busy week ahead with Australian CPI on Wednesday which is expected to continue to ease, reducing from 5.4% to 5.2% for the yearly measure. China’s PMIs are also due on Thursday, with markets hoping for signs of increased activity.

USD

The AUDUSD pair saw over 60 pips of movement during the weekend session, reaching lows of 0.6380 before opening this morning slightly up at 0.6409. Wall Street closed higher on Friday with Dow Jones +0.7%, S&P 500 +0.7% and NASDAQ +0.9%. A bit of data out over the weekend with The University of Michigan Sentiment Survey for August was revised down to 69.5 from an initial reading of 71.2. Current Conditions and Expectations were revised lower with inflation forecasts revised higher. We also had FOMC Members Harker and Goolsbee speak accompanied by Fed Chair Powell. Powell spoke first, noting that the Fed was prepared to raise rates again if appropriate and would proceed carefully when deciding on further tightening. He acknowledged that there are also “signs that the economy may not be cooling as expected” and there is "evidence that the tightness in the labor market is no longer easing”. Persistent above trend growth was one reason cited for possible further tightening with policy to remain restrictive until inflation was sustainably lower. The USD was initially stronger after Powell's speech, however contrasting sentiment from The Fed's Harker cooled the USD strength after he said rates would remain on hold for the rest of the year. No data out for the US tonight.

EUR

Despite seeing some positive movement on Friday night after reaching highs of 0.5961, the AUDEUR failed to capitalize and quickly retraced to open this morning flat at 0.5935. European equities closed slightly higher on Friday with the CAC +0.2% and DAX +0.1%. Friday night saw the release of the German ifo Business Climate, which missed expectations of 86.8 at 85.7.We also saw ECB President Lagarde hit the wires at the Jackson Hole Symposium claiming that the ECB needs to set rates at a restrictive enough level for as long as necessary to bring inflation back to target. A quiet day today with only the release of some low-tier data in the form of M3 Money Supply y/y and Private Loans.

GBP

A lackluster night for data saw the AUDGBP experience little movement, opening flat this morning at 0.5095. British Equities saw little movement with the FTSE gaining 0.1%. Little out in terms of data Friday night, only seeing GfK Consumer Confidence come in slightly better than expectations of -29 at -25. Another quiet day for the Brits with only MPC Member Broadbent Speaking. Nothing major upcoming this week.

NZD

After seeing highs of $1.0872, the AUDNZD pair somewhat retraced to open this morning only slightly higher this morning at $1.0850. A quiet day on Friday will be followed by another quiet day today with no data releases until Wednesday’s Building Consents m/m.