Fed's Powell Pivots to Cutting Mode
AUD
AUD opens higher against most majors, benefitting from Federal Reserve Chair Powell's dovish commentary on Friday evening, seeing most global equities also rise. Asian equities finished the day higher, Shenzhen +2.1%, Hang Seng +0.9%, and Nikkei relatively unchanged. The ASX 200 closed -0.6% as healthcare and consumer staples lead losses at -2.35% and -2%. All Major equity indices gained, apart from the ASX. Commodities were up over all with Silver and Iron Ore being the biggest gainers at 2.1%. There was no data out for Australia or China over the weekend and today follows suit. Tomorrow, we'll see the minutes from the RBA's meeting at the beginning of the month, potentially shedding light on future policy decisions. Markets currently had 1/3 odds of a 25bps cut to the cash rate at the September meeting. 60 bps of cuts are currently priced in by the end of the year. On Wednesday, the major data for the week, we'll see Australian CPI y/y, expected at 2.3%, up from 1.9% last month.
USD
AUD/USD opens at 0.6488, 1% higher than Friday's open, soaring 80 pips following Federal Reserve Chairman Powell’s dovish speech at the Jackson Hole Symposium, which saw markets move to almost fully price in a 25bp cut at the September FOMC meeting. Powell said two things that triggered a broad USD sell-off: The 'situation suggests downside risks to employment are rising' and that the 'shifting balance of risks may warrant adjusting policy'. He could have been balanced, or even hawkish, but effectively chose to endorse the market discount for a rate-cutting phase ahead. The comments sparked Wall St. on Friday and saw the Nasdaq and the Dow Jones close +1.9%, while the S&P 500 closed +1.5%. A very quiet Monday date wise for the US. Thursday and Friday Prelim GDP q/q and Core PCE Price Index m/m will be released being the main look to for the USD this week.
EUR
AUD/EUR opens flat at 0.5540, with both currencies strengthening after Fed Chair Powell's dovish statements over the weekend. European equities closed higher with DAX and CAC at +0.3% and +0.4%. The week ahead will be relatively quiet until Thursday when ECB Monetary Policy Meeting Accounts comes out which is a detailed record of what influenced their decision on where to set interest rates recently and can give markets an idea of what needs to be seen for future decisions. Friday will have the 4 major economies (Germany, France, Italy, Spain) Prelim CPI m/m released.
GBP
AUD/GBP opens slightly up at 0.4801, FTSE follows theme closing up +0.1%. Bank of England Governor Bailey spoke at the Jackson Hole Symposium yesterday with his main point being focused upon the worker shortage of the UK which is impacting the economy’s growth. No major data out all week for the GBP and they start off the week with a bank holiday.
NZD
AUD/NZD opens up at 1.1056. Both the RBA and RBNZ seem to be looking for at least one more cut by the end of year according to markets. This morning, we had NZ Retail Sales q/q released higher than expectations are +0.5%. The Core figure also exceeded forecasts at +0.7%. Later in the week we will see ANZ Business Confidence data.