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Market Brief
Reserve Bank of Australia (RBA) governor Philip Lowe last night gave a speech during the Asia-Pac session and stated that while the outbreak of the coronavirus Delta variant is a significant setback for the Australian economy, he still believes economic growth will be stronger again in 2022. At the last monthly RBA board meeting, the central bank went ahead with their tapering of assets to keep borrowing rates low but were perceived to be more dovish as they reduced to $4 billion rather than the expected $5 billion. However, it will review this program in February rather than November as earlier announced. “By February we will know more about how the economy is responding to the easing of restrictions than we will know in November.”
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The AUDUSD has struggled to get above the 20 and 50 daily exponential moving averages, so we could be in for a dip to one of the balance areas or maybe the recent swing low to see if more buyers can be attracted to this pair. If there was to be a significant drop in the US dollar index, that may be enough to get the Aussie moving higher for those looking for reasons to stick with a long position.
The GBPUSD found support at the projected weekly pivot yesterday and following on from the good UK unemployment data which showed the rate fell to 4.6% in Q2 2021, in line with market expectations, the pound is trading above yesterday’s highs and heading towards the 1.389 level that we have had on the charts for a week.
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Again, for this currency pair to reach the significant swing highs and show a trend reversal, the DXY will need to drop. UK average earnings came in as expected and the unemployment rate is still above the pre-pandemic levels. Good news came in from the claimant count for unemployment change, which was down -58.6k showing a more resilient employment forecast.
The Japanese yen is under pressure after industrial production data showed a decrease of 1.5% month-on-month. The figure was in line with expectations with July’s index coming in at 100.4. On a monthly basis, the index of shipments and the inventories index both contracted by 0.6%, while the inventory rate grew by 1.2%.
Following on from hurricane Ida which caused an estimated $20-$30 billions worth of damage, the hurricane season continues with hurricane Nichols. The National Hurricane Centre (NHC) said on Tuesday that Hurricane Nicholas had made landfall along the Texan coast, with “heavy rain, high winds and dangerous surge ongoing.” The storm’s classification was officially upgraded to a Category 1 hurricane not long before landfall, with wind speeds of 75 mph.
This afternoon the markets will be focusing on the US inflation data, with CPI month-on-month and core CPI likely to show inflation maintaining above target levels.
If CPI stays above 5.4% the markets will renew their calls for a Fed November taper, anything less will make the US dollar seem a little less attractive.
