AUD Soars on Fed's Dovish Shift
AUD
The AUD has opened higher against most other major currencies as strong commodity performance and a firm dovish shift from Fed Chair Powell supported risk sentiment over the weekend. Commodities performed well on Friday with Gold +1.1%, Silver +2.9%, Iron Ore +1% and Copper +1.6%. Asian Equities were also mainly up with Shanghai Comp +0.2%, Nikkei +0.4%, Hang Seng -0.16% and ASX was unchanged. It's a bit of a quiet period for the AUD, with no major news over the past few days and no key releases until Wednesday, where we have Consumer Price Inflation figures. The annual CPI figure is expected at 3.4%, down from last month's 3.8% print. Any number higher than 3.4% could further support the sentiment that the RBA will be one of the last G10 central banks to cut interest rates.
USD
The AUDUSD gained serious momentum over the weekend, reaching 0.6798 highs for only the second time since January 2024, with the pair kicking off the week at 0.6786. This comes after Fed Chair Powell confirmed a September rate cut, stating “The time has come for policy to adjust. The direction of travel is clear”. The Jackson Hole Symposium speech left little doubt that the Fed will cut rates at its next meeting in mid-September, as he said that the battle against post-Covid inflation has been won. The question now is just by how much they will cut interest rates? The US jobs report in early September will likely play a determining role in this decision. Wall Street saw good gains across the board with the Dow Jones +1.1%, S&P 500 +1.1% and Nasdaq +1.5%. Tonight, we have Durable Goods Orders m/m which are expected to come out at 4%, compared with previous month’s -6.7%. It is a big week for the US with lots of data coming out with some of the main events to keep an eye out on being GDP Growth Rate q/q on Thursday and Core PCE Price Index on Friday.
EUR
The AUD opened up slightly higher against the EUR and Is currently sitting at 0.6064 which is close to monthly highs. On Friday, we saw no major news out of the Eurozone, with just the French Business Confidence coming out at 99 which was higher than the expected reading of 96. European Equities were both in the green with DAX +0.8% and CAC +0.7%. Today, we have German IFO Business Climate indicator figures which are expected to come in at 86.5 compared with last month’s reading of 87. The indicator has declined for a third consecutive month to 87 in July, the lowest since February. Tomorrow, we also have German GDP Growth Rate figures coming out and looking further into the week we have Euro Area Inflation Rate YoY Flash coming out on Friday where they are expecting it to have dropped from 2.6% to 2.3%.
GBP
The AUD opened up slightly higher against the Pound and is currently sitting at 0.5135, having risen from 0.5110 lows in Friday's session after Fed Chair Powell's dovish shift benefited the AUD. On Fridy we had Gfk Consumer Confidence which came out at -13 against an expected -12. This defied expectations of a slight improvement as concerns about the economy continued to weigh on households. On Saturday, Bank of England Governor Bailey spoke at the Jackson Hole Symposium and noted that inflation still remains a key sticking point for the central bank, though many pressures have eased faster than the BoE initially feared. UK equities closed up with the FTSE at +0.5%. Looking ahead, we have CBO Distributive trades tomorrow which measures monthly retail sales compared to the prior year. This expected to come in at -32 compared with previous reading of -43. Today is a UK bank holiday.
NZD
AUD opened up slightly lower against the NZD and is currently sitting at 1.0905, having touched near-3-week lows of 1.0891 earlier this morning before retracing. The NZD and AUD continue to gain momentum due to improved global risk sentiment and Jerome Powell’s dovish commentary. No news out of NZ for the next couple of days, however, on Thursday we have ANZ Business Confidence which jumped sharply last month to 27.1 from 6.1 in June which was the first rise in 6 months. This is mainly due to hopes that the RBNZ will start trimming cash rates later this year.