US consumer confidence up; ECB has more work to do to raise inflation; Japanese officials talk down Yen; new record short levels in GBP

By Jason Wong

The US dollar is stronger across the board, as investors have one eye on a possible rate hike later in the year.

The major currency US TWI index is up another 0.5%, taking the cumulative increase since Yellen’s speech on Friday to 1.5%. That index has now recovered all of its losses during August.

Helping the more positive USD tone was US consumer confidence rising to its highest level in nearly a year, with the ‘jobs plentiful’ indicator the strongest in over nine years. 

Earlier, German inflation data were much weaker than expected, highlighting that the ECB has more work to do to get inflation higher.  EUR/USD is down 0.4% to 1.1140.

The Yen has been the weakest major currency over the trading day, with USD/JPY up 1% to circa 103. Japanese officials continue to talk down the Yen with Chief Cabinet Secretary Suga saying the Japan will “respond” to any excessive currency moves. 

In a Reuters interview Abe advisor Hamada said that the BoJ could consider buying foreign bonds as a way to weaken the Yen.

It’s been a steady decline in the NZD since lunchtime yesterday, with the stronger USD the driving force.  The currency was close to its lows for the day around the 0.7205 mark at 6am this morning and is now at 0.7220, down 0.4% for the day.

With the AUD down 0.7% to just over the 0.75 mark, NZD/AUD has breached 0.96. That level has represented an area of technical resistance since early June so it might be tough going to push higher over the near term.  Today’s ANZ business outlook survey is the key local release this week.

Of the major currencies, the GBP has been the most robust against the USD, falling just 0.2% to 1.3080. Speculative positions against GBP are at record short levels, so it’s going to take some fresh news to push GBP lower over the short term.

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