Talking Points:
- US Dollar follows bond yields lower as anti-risk Yen outperforms
- New Zealand Dollar extends gains as RBNZ meeting approaches
- Australian Dollar unmoved after final speech from RBA’s Stevens
The US Dollar faced selling pressure in overnight trade as US bonds advanced, pushing rates lower and undermining yield support for the benchmark currency. Fixed income demand appeared to stem from haven demand, with rising bond prices mirroring a drop in S&P 500 futures. Tellingly, the anti-risk Japanese Yen outperformed among the G10 FX majors.
The British Pound corrected higher having slumped following dovish comments from the BOE’s Ian McCafferty yesterday. The New Zealand Dollar continued to rise in what looks to be an extended pre-positioning for the upcoming RBNZ monetary policy announcement. A 25bps rate cut is broadly expected, meaning surprise risk is skewed to the upside for the currency if forward guidance is less dovish than what is already priced in. With that in mind, gains may reflect protective short-covering.
A scheduled speech from RBA Governor Glenn Stevens – his final outing at the helm of the central bank before stepping down next month – did not generate a dramatic response from the Australian Dollar. Stevens reiterated familiar sentiments, cautioning about over-reliance on monetary policy to deliver growth and urging fiscal authorities to do their part. He also voiced support for inflation-targeting as a policy regime versus more rigid alternatives like that gold standard or an exchange-rate peg.
Looking ahead, another quiet day on the European and US economic data fronts is likely offers few stumbling blocks for established momentum. As noted yesterday however, the lull in high-profile news flow may make markets more sensitive than usual to unexpected headline risk. Otherwise, the aforementioned RBNZ rate decision marks the next key inflection point.
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Asia Session
| GMT | CCY | EVENT | ACT | EXP | PREV |
|---|---|---|---|---|---|
| 22:00 | NZD | REINZ House Sales (YoY) (JUL) | -10.1% | - | 6.0% |
| 23:50 | JPY | Housing Loans (YoY) (2Q) | 2.4% | - | 1.9% |
| 23:50 | JPY | Machine Orders (MoM) (JUN) | 8.3% | 3.2% | -1.4% |
| 23:50 | JPY | Machine Orders (YoY) (JUN) | -0.9% | -4.5% | -11.7% |
| 23:50 | JPY | PPI (MoM) (JUL) | 0.0% | -0.1% | -0.1% |
| 23:50 | JPY | PPI (YoY) (JUL) | -3.9% | -4.0% | -4.2% |
| 00:30 | AUD | Westpac Consumer Conf Index (AUG) | - | - | 99.1 |
| 00:30 | AUD | Westpac Consumer Conf SA (MoM) (AUG) | 2.0% | - | -3.0% |
| 01:30 | AUD | Home Loans (MoM) (JUN) | 1.2% | 2.3% | -0.8% |
| 01:30 | AUD | Investment Lending (JUN) | 3.2% | - | 5.3% |
| 01:30 | AUD | Owner-Occupier Loan Value (MoM) (JUN) | 1.8% | - | -0.1% |
| 02:00 | JPY | Tokyo Avg Office Vacancies (JUL) | 3.94 | - | 4.07 |
| 03:05 | AUD | RBA Governor Stevens Speech in Sydney | - | - | - |
| 04:30 | JPY | Tertiary Industry Index (MoM) (JUN) | 0.3% | 0.8% | -1.2% |
European Session
| GMT | CCY | EVENT | EXP/ACT | PREV | IMPACT |
|---|---|---|---|---|---|
| 06:00 | CHF | UBS Real Estate Bubble Index (2Q) | 1.32 (A) | 1.38 | 1.35 |
Critical Levels
| CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
|---|---|---|---|---|---|---|---|
| EUR/USD | 1.1000 | 1.1052 | 1.1084 | 1.1104 | 1.1136 | 1.1156 | 1.1208 |
| GBP/USD | 1.2817 | 1.2910 | 1.2956 | 1.3003 | 1.3049 | 1.3096 | 1.3189 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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