AUD, NZD, CAD
- RBA Minutes - Relatively Upbeat But Sees a Rising AUD as a Challenge to Economic Rebalancing
- RBNZ Leaves Rates Unchanged, Says More Easing Necessary
- PMI Services 57.9 vs. 54.5 Prior
- Retail Sales (MoM) -0.1% vs. 0.1% Expected
- Retail Sales Ex Autos (MoM) -0.1% vs. 0.5% Expected
- CAD CPI (MoM) -0.2% vs. 0.1% Expected
- BoC CPI Core (MoM) 0.0% vs. 0.2% Expected
- Caixin China Manufacturing PMI
- Trade Balance- Potential for downside surprise given drop in PMI Manufacturing Index
- July GDP – Likely to be weaker given lower retail sales
- Support AUD .7500 NZD .7200 CAD 1.3000
- Resistance AUD .7750 NZD .7400 C
All three of the commodity currencies ended the week stronger against the U.S. dollar but the gains varied greatly. The best performing currency was AUD, which received support from the neutral RBA minutes. The RBA did not see any serious need to ease and noted that their main reason for leaving interest rates on hold in September was because it sees current monetary policy as being accommodative to its inflation goals. In the coming week, there were no major Australian economic reports so AUD driven flows should be at a minimum.The worst performing currency was the New Zealand dollar, which was hit hard by the Reserve Bank’s dovish monetary bias. They made it very clear that “further policy easing will be required” because the New Zealand dollar is too strong. This bias should keep lead to further underperformance for NZD especially against AUD and CAD. New Zealand trade numbers are scheduled for release at the beginning of the coming week but the impact on NZD should be limited.
The Canadian dollar traded strongly this past week thanks to the sell-off in the U.S. dollar and corresponding rise in oil prices. There were no Canadian economic reports released until Friday so the currency took its cue from oil, which found below $43 a barrel. However the rally in the CAD was quickly halted by softer Canadian data. Retail sales and consumer prices declined in the month of August. Consumer spending has fallen for the second month in a row and more importantly we have not seen an increase in 4 months. CPI stagnated causing the year over year rate to slow to 1.8% from 2.1%. Canadian GDP numbers are scheduled for release next week and the drop in spending signals the possibility of lower growth. We think these figures should enough to take USD/CAD above 1.32.