Talking Points:
- US Dollar sinks on FOMC minutes, Aussie and Kiwi outperform
- Fed-speak in focus as markets search for coherent policy stance
- UK retail sales, Eurozone CPI data may pass with little fanfare
The US Dollar traded broadly lower in overnight trade as Asian markets took their turn to respond to the release of minutes from July’s Federal Reserve monetary policy meeting. The document revealed an FOMC committee divided about how to balance domestic developments with external risks. Traders seemingly judged that deadlock will delay stimulus withdrawal and duly punished the greenback.
The Australian and New Zealand Dollars outperformed as the prospect of longer delay in Fed stimulus withdrawal fueled demand for better-yielding alternatives, boosting high-beta FX. The Aussie found additional support in unexpectedly strong employment data. The economy added a net 26.2k jobs in July, topping expectations calling for a 10k gain, while the unemployment rate ticked lower to 5.7 percent.
Fed-speak is in focus ahead, with commentary from San Francisco and New York Fed Presidents John Williams and Bill Dudley on the docket. Both policymakers triggered volatility earlier in the week: Williams published an essay calling for the Fed to alter its policy-setting framework to allow rates to stay lower for a longer time while Dudley railed against the markets’ under-pricing of on-coming hikes. The greenback dutifully dropped after Williams’ paper hit the wires, then rebounded just hours later as Dudley spoke.
From here, both policymakers have the benefit of having witnessed price action’s sensitivity to their pronouncements as well as the FOMC minutes document. With that in mind, it will be interesting to see if they opt to dig in their heels or seek to forge a somewhat unifying message in an attempt to offer the markets a more coherent sense of the central bank’s trajectory (at least to the extent that such a thing is possible).
UK Retail Sales figures and the final revision of July’s Eurozone CPI print headline the calendar in European trading hours. Both may pass with little fanfare considering their limited implications for near-term BOE and ECB policy bets. The former central bank is likely in wait-and-see mode having just expanded stimulus while the latter probably feels little urgency to act having seen regional financial conditions normalize since the Brexit referendum outcome.
Asia Session
| GMT | CCY | EVENT | ACT | EXP | PREV |
|---|---|---|---|---|---|
| 22:00 | NZD | ANZ Job Advertisements (MoM) (JUL) | 1.4% | - | 0.5% |
| 23:50 | JPY | Trade Balance (JUL) | ¥513.5b | ¥273.2b | ¥693.1b |
| 23:50 | JPY | Trade Balance Adjusted (JUL) | ¥317.6b | ¥167.7b | ¥335.0b |
| 23:50 | JPY | Exports (YoY) (JUL) | -14.0% | -13.7 | -7.4 |
| 23:50 | JPY | Imports (YoY) (JUL) | -24.7% | -20 | -18.8 |
| 01:00 | NZD | ANZ Consumer Confidence Index (AUG) | 117.7 | - | 118.2 |
| 01:00 | NZD | ANZ Consumer Confidence (MoM) (AUG) | -0.4% | - | -0.6% |
| 01:30 | CNY | China July Property Prices | - | - | - |
| 01:30 | AUD | Employment Change (JUL) | 26.2k | 10.0k | 10.8k |
| 01:30 | AUD | Unemployment Rate (JUL) | 5.7% | 5.8% | 5.8% |
| 01:30 | AUD | Full Time Employment Change (JUL) | -45.4k | - | 44.0k |
| 01:30 | AUD | Part Time Employment Change (JUL) | 71.6k | - | -33.2k |
| 01:30 | AUD | Participation Rate (JUL) | 64.9% | 64.9% | 64.9% |
| 01:30 | AUD | RBA FX Transactions Government (JUL) | -463m | - | -1731m |
| 01:30 | AUD | RBA FX Transactions Market (JUL) | 444m | - | 1720m |
| 01:30 | AUD | RBA FX Transactions Other (JUL) | 48m | - | 36m |
| 06:00 | JPY | Machine Tool Orders (YoY) (JUL F) | -19.7% | - | -19.6% |
European Session
| GMT | CCY | EVENT | EXP | PREV | IMPACT |
|---|---|---|---|---|---|
| 08:00 | EUR | Eurozone ECB Current Account SA (JUN) | - | 30.8b | Low |
| 08:00 | EUR | Eurozone Current Account NSA (JUN) | - | 15.4b | Low |
| 08:30 | GBP | Retail Sales Ex Auto Fuel (MoM) (JUL) | 0.3% | -0.9% | Medium |
| 08:30 | GBP | Retail Sales Ex Auto Fuel (YoY) (JUL) | 3.9% | 3.9% | Medium |
| 08:30 | GBP | Retail Sales Inc Auto Fuel (MoM) (JUL) | 0.1% | -0.9% | Medium |
| 08:30 | GBP | Retail Sales Inc Auto Fuel (YoY) (JUL) | 4.2% | 4.3% | Medium |
| 09:00 | EUR | Eurozone Construction Output (MoM) (JUN) | - | -0.5% | Low |
| 09:00 | EUR | Eurozone Construction Output (YoY) (JUN) | - | -0.8% | Low |
| 09:00 | EUR | Eurozone CPI (MoM) (JUL) | -0.5% | 0.2% | Medium |
| 09:00 | EUR | Eurozone CPI (YoY) (JUL F) | 0.2% | 0.1% | Medium |
| 09:00 | EUR | Eurozone CPI Core (YoY) (JUL F) | 0.9% | 0.9% | Medium |
| 11:30 | EUR | ECB account of the monetary policy meeting | - | - | Medium |
Critical Levels
| CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
|---|---|---|---|---|---|---|---|
| EUR/USD | 1.1135 | 1.1209 | 1.1249 | 1.1283 | 1.1323 | 1.1357 | 1.1431 |
| GBP/USD | 1.2822 | 1.2929 | 1.2985 | 1.3036 | 1.3092 | 1.3143 | 1.3250 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To receive Ilya's analysis directly via email, please SIGN UP HERE
Contact and follow Ilya on Twitter: @IlyaSpivak
