USD Treads Water as Fed Cut Bets Grow

AUD

The Aussie Dollar opens higher / flat against the major currencies, with continued support from the strong domestic inflation release on Wednesday, with minimal economic data announced over the past 24h. Asian equities closed higher, with the ASX +0.2%, Shanghai Comp +1.1% and Nikkei +0.7%. Commodities mirrored this outside of Natural Gas (-3.0%). Yesterday had Australian Private Capital Expenditure q/q releasing at 0.2%, heavily missing expectations and indicating a reluctance by private businesses to invest. Today will have Private Sector Credit m/m releasing at 11:30am, (exp. 0.6%), which will highlight how confident consumers are in their spending. This weekend will have Chinese Manufacturing and Non-Manufacturing PMIs on Sunday, with current expectations that a slight downsize will be shown in factory activity.
 

USD

The AUD/USD opens higher at 0.6528, with the USD dipping as markets price in a higher chance of a US Federal Reserve rate cut in September. Wall Street closed higher, with the Dow Jones +0.2%, S&P 500 +0.4% and NASDAQ 0.5%. Last night saw American Prelim GDP q/q (+3.3% vs. exp. +3.1%) and Unemployment Claims (229K vs exp. 231K). This morning, Fed Waller’s speech stated that rate cuts were to be expected over the next 3-6 months, with the USD weakening in the aftermath. Traders are currently pricing 87% odds of a 25bps cut from the Federal Reserve in September. Tonight, we will see Core PCE Price Index m/m, which is the US Fed Reserve’s preferred method of tracking inflation, expected at +0.3% month-on-month. Monday will be a bank holiday in the US (Labor Day).
 

EUR

The AUD/EUR opens flat at 0.5591, with minimal economic data releasing last night and mostly hitting expectations. On equities, the DAX closed flat and CAC +0.2%. Today will have German Prelim CPI m/m and Spanish Flash CPI m/m due today, with current expectations of a 0.3% reading. Additionally, a flurry of other economic indicators from Europe will be released. The next day to look forward to is Tuesday night, with Eurozone inflation figures.
 

GBP

The AUD/GBP opens slightly higher at 0.4833, reaching 2-week highs of 0.4838, based off the strengthening of the AUD. No news yesterday, however, the FTSE closed -0.4%. The next data event to watch is September 3 at 11:15pm, with the monetary policy report hearings. These will be useful to view the Bank of England’s views on their economic outlook.
 

NZD

The AUD/NZD opens lower at 1.1102, falling from 4-month highs of 1.1122 yesterday. Monday will have building consents m/m released at 8:30am.