Commodity currencies ended the week on a healthy note and the ousting of Trump’s chief strategist Bannon was seen as a positive sign by the market.
US political factors appeared to remain in the driving seat on Friday, seeing the USD remain under pressure through much of the session. That trend was halted after US consumer sentiment data came in much better than expected, rising to a 7-month high, and reports surfaced that Trump’s chief strategist Bannon would be leaving the White House Administration. The removal of Bannon is another move by new Chief of Staff Kelly to impose some order to the Administration, a positive development in the eyes of the market. There is some hope now that the economic policy agenda gets back on track.
USD/JPY fell by 0.4% for the day to 109.20, but traded in a wide range of 108.60-109.60 reflecting the US political machinations. The USD-positive news was enough to stem the slide in the USD but not significant enough to drive any notable recovery overall. The DXY ended the day down 0.2% while the TWI-majors index was down 0.4%.
The NZD ended the week around 0.7315, the same level it started the week and up 0.4% for the day. It caught a tailwind from other rising commodity currencies, with NOK, CAD, AUD and the NZD the best performers for the session. Support continued for metal prices, with many reaching multi-year highs amid solid demand and diminishing stockpiles, iron ore prices (Qingdao benchmark) rose by more than 3% for the second consecutive day, and oil prices were up in the order of 3%+, helped by reports of a US refinery shutdown.
CFTC positioning data showed some trimming of NZD positions in the week through to 15 August (25k contracts vs the peak of 35k a couple of weeks earlier), but net long positioning remains at a historically high level, keeping the NZD vulnerable to the downside on any negative news.
The NZD was flat to modestly higher on most of the crosses, with modest falls against other commodity currencies, with NZD/AUD down slightly to 0.9220 and NZD/CAD down to around 0.94.
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