Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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Equities surged as Fed Chairman Powell announced that it’s time to begin cutting interest rates. The S&P 500 gained 1.1% and the Nasdaq climbed 1.5%, while the Euro Stoxx 50 and FTSE 100 both increased by 0.5%. The yield on the US 10-year decreased by 5.3 bps to 3.80%.
U.S. new home sales jumped 10.6% m/m in July, reaching an annual rate of 739,000, the fastest growth in 14 months. June’s sales were also revised upward to a 0.3% increase, compared to the previously reported 0.6% decline. Sales grew across all major regions, with lower mortgage rates (now at 6.5% compared to 7.3% in April) and builder incentives being key factors behind the surge.
Fed Chair Powell announced on Friday that monetary policy is now too restrictive, signalling that it’s time to begin lowering interest rates. In his Jackson Hole speech, Powell stated “The time has come for policy to adjust. The direction is clear, but the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.” He added, “We do not seek or welcome further softening in labor market condition. Overall, the economy is growing at a solid pace, but the evolving inflation and labor market data suggest a changing situation. The upside risk to inflation have lessened, while the downside risks to employment have increased. We are committed to supporting a strong labor market as we continue to work towards price stability”.
Key currency views for the week
AUD/USD will trade around 0.6750 this week in our view.
AUD/EUR face the Australian CPI for July and Eurozone CPI for August.
AUD/GBP can remain heavy, with support at 0.5085.
AUD/NZD will test support at 1.0861 if market pricing for an RBA interest rate cut is brought forward.
AUD/JPY will consolidate lower this week. A soft Australian monthly CPI indicator will pull AUD/JPY down towards support at 94.69 (23.6% fibbo).
AUD/CAD will trade in a tight range around 0.9200 this week in our view.
AUD/CNH will fall towards support at 4.7795 (50% fibbo) this week if the Australian monthly CPI indicator surprises to the downside.
Today, only secondary data releases are expected, such as Germany’s IFO survey, and tonight, U.S. durable goods orders and consumer confidence. Later in the week, key economic reports to watch include Euro zone CPI, Canadian GDP, and U.S. PCE deflators at the week’s end.
Here are the latest mid-market rates:
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6750 |
| AUD/NZD | 1.0861 |
| AUD/JPY | 94.69 |
| AUD/CNH | 4.7795 |
| AUD/EUR | 0.6065 |
| AUD/GBP | 0.5085 |
| AUD/HKD | 5.2935 |
| AUD/SGD | 0.8830 |
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