Fed Chair Powell to Speak Tonight
AUD
The Aussie Dollar opens lower across all the majors as risk sentiment soured overnight alongside poor performance among commodities yesterday. Key losses were Natural Gas -1.3%, Wheat -1.7% and Copper -1.2%. Silver fell -0.7% while Gold was flat. The ASX mirrored yesterday’s finish closing +0.2%, while Asian equities ended mostly up, the Nikkei +0.7%, Hang Seng +1.4%, and Shenzhen -0.3%. No data was released yesterday besides Flash Manufacturing PMI and Flash Services PMIs, showing that our manufacturing sector continuing to shrink for the seventh straight month. Today, the Jackson Hole Symposium in Wyoming USA begins – a 3-day private meeting where key financial market participants attend, including central bankers and financial ministers. Although the meeting is private, reporters are allowed to ask questions, and the answers can create significant market volatility. There will be no data releases from Australia or China until next Wednesday, with Australian CPI y/y expected to drop from 3.8% to 3.6%.
USD
The AUDUSD opens lower at 0.6704, dropping overnight from yesterday’s 1 month high of close to 0.6760 as Gaza peace talks peter out. Wall Street reflected the worsening risk sentiment with the Nasdaq trading -1.6%, the S&P 500 -0.8% and the Dow Jones -0.4%. Last night, American Unemployment Claims were released exactly as expected, increasing by 4K to 232K from last week. In addition, the Flash Manufacturing PMI showed that US manufacturing contracted at its fastest pace all year, further encouraging expected US Federal Bank interest rate cuts this September to stimulate the economy. However, FOMC Member Collins stated that the Federal Bank were wary of cuts and Flash Services PMI were announced above expectations, providing ammunition for the Fed to not cut rates. Regardless, markets are fully pricing in a cut from the Fed next month, with near 75% odds of a 25bps cut and near 25% odds of a 50bps cut. Over the weekend, several FOMC Members will speak at the Jackson Hole Symposium, including Fed Chair Powell this evening, and any comments on the US economy can cause volatility for the AUDUSD pair. In previous years, Powell has used the Jackson Hole speech to outline broad policy initiatives and to provide clues about the future of policy. His speech will expecially garner attention given recent, wide-spread concerns of a weaker US labour market.
EUR
The AUDEUR opens lower at 0.6031, seeing highs of 0.6062 yesterday afternoon before dropping overnight to current levels as Flash Manufacturing and Services PMIs were released for France, Germany and the Eurozone. The data showed that European manufacturing contracted even more than expected, however the European services sector continues to expand, also by more than expected. We also saw the European Central Bank (ECB) Meeting Minutes from July. The minutes showed the central bank had become more cautious on Europe's growth and inflation outlook, wanting to keep all options open for the September meeting, although maintaining a slight cutting bias despite sticky services inflation remaining a potential concern. European equities closed slightly higher, with the DAX +0.2% and the CAC flat. No major data will be released over the weekend, although key ECB Members will be attending the Jackson Hole Symposium.
GBP
The AUDGBP opens lower at 0.5118, dropping heavily from last night due to healthy economic data from Britain. British Flash Manufacturing PMI and Flash Services PMI showed that both sectors are expanded faster than expected, helped by the recent Bank of England interest rate cut. The FTSE also closed +0.1%. No key data will be released today, although Members of the BOE will be at the Jackson Hole Symposium and there is a UK Bank Holiday on Monday.
NZD
AUD/NZD opens down this morning at 1.0914, continuing Thursday’s drop after we saw the currency pair lose the 1.10 handle. This morning, Retail Sales q/q were announced at -1.2%, expected at -1.0%. No major NZ news today or next week, although the Jackson Hole Symposium may cause volatility over the weekend.