- USD holds steady with the exception of the EUR
- JPY breaks past its range and markets now eye a new level of 100 USD/JPY
- Commodity currencies are weaker with NZD reaching its lowest in over 30 days
USD – The dollar held steady against most major currencies, with the exception of a euro rally, as limited US economic data is released today. On the back of recent data, the greenback remains supported from the rise in US treasury yields, currently hovering around 2.9%. Adding further support were yesterday’s Fed minutes that met the market’s expectation that the central bank will begin tapering its bond-buying program next month. Today marks day two of the annual Jackson Hole symposium, where the overall focus will be on influential Federal Reserve Vice Chair Janet Yellen, who is one of the leading candidates to replace current Fed chair Ben Bernake.
EUR – The euro surged vs. the dollar today, currently up 0.3% and slightly below the key technical level of 1.34 on hawkish comments from the ECB and encouraging German GDP data. Ewald Nowohy, a policymaker for the ECB, said he did not see much reason for the central bank to cut interest rates any further. His comments contrast with a statement earlier this month made by ECB board member Peter Praet, who stressed the central bank’s “easing bias”. German GDP came in at 0.7% q/q, meeting expectations. Imports and exports both proved stronger than expected, rising 2% and 2.2% respectively. Next week’s primary data releases include German unemployment and CPI numbers.
GBP – Sterling is ﬂat against the US dollar after 2nd qtr GDP reported a growth rate of 0.7% q/q and 1.5% y/y as stronger exports, imports, and government spending stood out as key drivers. Next Wednesday, Governor Carney will have the opportunity to address the forward guidance and market pricing in the UK when he speaks at a lunch event. This poses a risk for GBP and will likely add near‐term downside pressure to the currency.
JPY – The Japanese yen broke out of its range against the dollar as it briefly reached an interbank rate of USD/JPY 99.15 in this morning’s trading session. News releases in Japan were limited today but this weekend’s expected comments by Governor Kuroda adds some caution. The yen bounced back from losses this morning but investors are now focusing on a new level of 100 for the USD/JPY.
Commodity Currencies – Commodity-linked currencies are slightly weaker despite the surge in gold and oil, which climbed 1.49% and 1.12% respectively, from yesterday’s close. The Canadian dollar traded weaker, having lost 0.4% against the USD, bringing its losses since last Friday’s high to 2.7%. We expect ongoing CAD weakness against the USD as Canada's annual inflation rate edged up to only 1.3% in July from 1.2% in June, which may not be a big enough increase to pressure the BoC to raise rates anytime soon. The BoC is expected to meet just over a week away on September 4th. Meanwhile, the NZD reached its lowest level in over 30 days against the USD, pulling back gains it took last week to drop below where it started in the beginning of this month. The AUD is bouncing back slightly after Iran raised its export expectations of iron ore and iron products to China and India, showing an increased demand for the commodity, handing some support to the AUD.
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