USD support faded as the week came to a close, the NZD finished up the strongest of the majors group finishing at 0.6640; NZDAUD eased lower from the open of 0.9072 to trade around the 0.9045 mark

NZD/USD

The New Zealand Dollar (NZD) traveled higher Tuesday against the US Dollar (USD) after President Trump  made comment that he was not "thrilled" by the raising of interest rates. He was making reference to Jerome Powell's view of raising interest rates this year. The kiwi started the week at 0.6630 and drifted lower Monday before spiking to 0.6650 in risk off market conditions. In 2016 Powell agreed when taking on the job as Fed chairman that he would support "cheap money" but has embraced the prospects of raising cash rates to combat a fast growing US economy, upsetting the President. Powell’s job is safe as he has another 3 years to run on his term and cannot be replaced by an angry President. The New Zealand Dollar is still caught in a long term bearish channel from the high of 0.7400 and we expect the kiwi to taper off further as fundamentals in the US including rate announcements drive the US Dollar higher on demand. This week sees NZ Retail Sales Thursday which is expected to print well and boost the kiwi. For now the kiwi will take every positive market risk sentiment it can get, we suggest buying the US on spikes like the one in place currently.

NZD/AUD (AUD/NZD)

The New Zealand Dollar (NZD), Australian Dollar (AUD) pair continued where it left off last week easing lower from the open of 0.9072 to trade around the 0.9045 (1.1056) mark. Light support around 0.9050 (1.1050) was broken Tuesday as it heads towards 0.9000 (1.1110). With NZ Retail Sales the main news item on the calendar this week, this should show an improvement on last month's poor figures and support the kiwi Wednesday. Our view is that current price wont deviate much between the range of 0.9000 (1.1110) and 0.9100 (1.0989). Second tier Australian construction may have a small impact Wednesday but we doubt it.

NZD/GBP (GBP/NZD)

The British Pound (GBP) and New Zealand Dollar (NZD) pair remains uncertain of any real direction. Bobbing around the 0.5192 (1.9260) area this week after briefly touching 0.5215 (1.9170) after the open, the GBP looks to retain the upper hand. It should be an interesting week with very little economic data to print - only NZ Retail Sales Wednesday to be excited about. Brexit headlines will continue to drive price in both directions, long term nothing presents itself on the charts, we suspect as markets receive more certainty around brexit we should see recent bottoms around 0.5060 (1.9750) tested. Westpac made comment this morning saying the next move by the NZ economy will be a modest pickup in growth with it gradually moving to a surer long term hold.

 NZD/CAD

While there is a lot to like about the Canadian Dollar (CAD) at the moment with strong local fundamental data, broader geopolitical uncertainties are keeping a lid on the Loonie at the moment. Against the New Zealand Dollar (NZD) it has weakened significantly and should continue to ease lower over the week. The incredible 3% CPI print has likely increased interest of CAD bulls but it’s worth noting that the figure seems to be a tad skewed as it was driven by surging gas prices. Still with inflation hovering around 2% we should still see the Bank of Canada hike rates in 2018.

NZD/EURO (EURO/NZD)

The Euro (EUR) has traded higher against the New Zealand Dollar (NZD) this week to 0.5790 (1.7280) breaking the 0.5800 (1.7240) physiological handle. The cross continues to consider the idea of breaking support at 0.5725 (1.7470), being the lowest level since September 2015, but recent buoyant Eurozone economic data has been overshadowed by risk support for the kiwi. The only first tier data to publish this week is NZ Retail Sales which is expected to be in line with expectations of 0.4% considerably higher than last month’s 0.1%. Also to watch is a slew of Euro manufacturing figures out in Germany and France.

NZD/YEN

NZ Manufacturing figures impressed Friday coming in above expectations. The New Zealand Dollar (NZD) improved against the Japanese Yen (JPY) pushing up towards 73.60. Light trading conditions this week has seen the pair ease lower back to the 73.00 level as markets wait for further currency drivers. NZ Retail Sales prints Wednesday and should show an improvement on last month’s figures - we expect the kiwi to retest 73.50 again as long as risk conditions remain favourable.

AUD/USD

The Australian Dollar (AUD) saw a continuation of last week’s momentum well supported through 0.7320 against the US Dollar (USD) Tuesday. It’s understood that Peter Dutton has lost his bid for the Liberal leadership in a vote Tuesday. He has resigned and will park up on the backbench where he will make another challenge for the leadership at later stages. The RBA rounds off the minutes from the August meeting with a positive view expected for the Australian economy. Federal Reserve minutes are also on the calendar later in the week which will add volatility to currencies prior to the Jackson Hole Symposium Friday. Trump trade talks with China will resume later this week so be aware of further carnage and risk shifts. Stern resistance will be met around the 0.7460 area if the AUD considers another retest of this level. Further replacements to the downside are likely to continue if a break through 0.7460 doesn't eventuate.

AUD/GBP (GBP/AUD) 

The Australian Dollar (AUD) closed the week on a high after pushing back above 0.5765 (1.7350) against the British Pound (GBP) in choppy conditions. RBA monetary minutes release today to give us more insight into the RBA future plans. We have no first tier economic data to watch this week so any movement will be driven by any turns in the global risk environment. Official industrial production figures out of China missed market forecasts significantly and have weighed on the Aussie, without a trade settlement between China and the US the Aussie is capped to the topside in what could turn into a real battle between the two currencies in an already bouncy market.

AUD/EURO (EURO/AUD)

A pickup in risk sentiment late Friday shifted the Australian Dollar (AUD) higher versus the Euro to 0.6400 (1.5630), where it met resistance heading into the weekend. Buying interest this week in the pair has been fickle trading up to 0.6410 (1.5600) and back Tuesday. Lowe will give the minutes of the recent RBA meeting today at 1.30pm and is expected to give an upbeat tone on future inflation prospects. German and French manufacturing numbers print this week and should offer the Euro (EUR) support heading into this week’s yearly pivotal Jackson Hole Symposium Friday.

AUD/YEN

As we expected and commented in the last commentary the Japanese Yen (JPY) Australian Dollar (AUD) pair remained in the 80.00 to 81.00 zone closing the week at 80.98. RBA governor Lowe spoke late Friday giving the Aussie a boost. We don’t see much on the calendar this week for the pair to make great variations to current price action, but we do have the release of the RBA August minutes out today along with second quarter construction Thursday. The Jen remains sensitive to the geopolitical scene with incoming headlines around US-China trade talks able to shift markets at ease.

AUD/CAD

As risk markets turned positive last week the Canadian Dollar (CAD) has fallen behind against the Australian Dollar (AUD) with markets bidding up the Aussie. Not even the huge 3% CPI headline was enough buoy the Loonie with geopolitical uncertainties taking the lead. The pair closed the week around 0.9550 after coming from 0.9420 earlier in the week and has continued through 0.9570 Tuesday. Today’s RBA minutes could shift price in the meeting today but the most significant data to publish this week for the pair is Thursdays Canadian Retail Sales.

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Market commentary:

Equity markets traded in the red most of last week with markets remaining risk averse. Friday saw a more relaxed approach to geopolitical tensions with currency market with equities starting to post gains. US Dollar support faded as the week came to a close, the New Zealand Dollar finished up the strongest of the majors group finishing at 0.6640.  Chinese officials have received an invite from the the US to talk about trade later this month. China have confirmed they will attend a delegation led by Vice Commerce Minister Wang Shouwen to travel to America this week. Remember the next round of trade tariffs on 16 Billion worth of Chinese products kick off on the 23rd of August, China will clearly be trying to avoid this. The Turkey and Qatar central banks have signed a currency deal Friday to make sure liquidity and financial support is ongoing for the Turkish Lira. This comes after Qatar has already pledged an economic package of investment. German bank Bundersbank has come out and said the (ECB) European Central Bank is on course to reduce its current stimulus. Bundersbank also said the Turkey issues will have limited impact on German banks citing that Turkey was 16th on the list of German trading partners. In Brexit news via UK press we hear that EU migrants will be given the right to stay in the event of no-deal Brexit with fears of labour shortages. Britain will agree to enable migrants to live in the UK and continue to access the NHS to claim benefits. A no deal will rely heavily on the availability of existing labour with the event of further talks breaking down. This week we have a relatively light economic calendar, Jackson Hole Symposium in Wyoming starts Friday and could throw up its normal snippets of controversy and volatility if drama eventuates.

Australia

The Australian Dollar shrugged off last week’s employment data which showed a net loss of jobs added to the labour market after markets were expecting a healthy increase. With the unemployment rate coming in lower than the expected 5.4% at 5.3%- the lowest level in 6 years this seemed to mollify fallout in the aftermath of the data. The news of China's delegation travelling to the US this week to resolve trade disputes, and broad based profit taking on US Dollar longs, have been enough to inspire an Aussie recovery to 0.7300 against the greenback. RBA's governor Lowe said he expected rates to remain on hold for some time to stimulate the economy, and the AUD and assist the recovery. The RBA minutes release today to watch with Jackson Hole Symposium Friday.

New Zealand

The New Zealand Dollar has traded its way to the strongest performer over the past week. From the low of 0.6540 it has pushed off its lows and after risk markets returned to normality Friday driving it to 0.6640 against the US Dollar. The ANZ bank have weighed in on monetary policy saying they expect the Reserve Bank will consider a cut to rates instead of a rise as the next move, citing global risks and offshore funding costs. A drop in mortgage rates may have an impact of house values as they have done in the past when rates fall but the large unknown is how the "foreign buyers ban" will affect the housing market long term. A negative impact on house values could be significant if mortgage rates rise in 2020. Retail Sales Wednesday is the most important news for the week locally expected to print up on last month’s 0.1%

United States

Risk markets returned to the table late last week with USD bears keeping the demand for the US Dollar subdued. The only currency performing worse than the greenback as the British Pound. The US Dollar Index fall from 96.98 early in the week to trade Monday at 96.16 showing its overbought status. The surge in high yielding assets such as equities and commodities was largely based on solid earnings on wall street leading to the DJIA closing at its highest level since February. Michigan Consumer Sentiment was also down on expectations printing at 95.3 from the previous 97.9 and missing the mark of 98.1. Markets are expecting a 93.6% probability that the Fed will hike rates on September 27th and a 61.3% of hiking in December 2018. FOMC member Bostic will speak this week as well as Fed chair Powell at the Jackson Hole Symposium in Wyoming. Expect firework if Trump's agenda with trade takes a turn.

Europe

Eurozone final yearly CPI printed bang on expectations of 2.1% for the year ending in July 2018 up from 2.0% from the previous year. The lowest annual rates were in Greece with 0.8% Denmark 0.9% and Ireland at 1.0% with the highest recorded figures coming out of Bulgaria at 3.3% and Romania at 4.3%. The Euro continued its midweek rise from 1.1300 against the greenback travelling to 1.1470 at the weekly close. A nice push higher as US bears also bid the currency higher as risk returned. Contagion risk out of Turkey has also given the Euro an upgrade with the situation being defused for the moment. Looking ahead this week we have a slew of French and German manufacturing data to publish Thursday with most of the worlds finance and central bank folk attending the yearly Jackson Hole Symposium in Wyoming, USA.

United Kingdom

With both Retail Sales figures surprising to the upside and unemployment data also surprising it seems a fairly solid week for the British Pound. Although the Pound has been well supported last week and pushing higher to 1.2790 today we still see a market evidenced by risk fear. We think the Pound should be trading a lot higher at least post 1.3000 against the US Dollar. But its not - and this is because of a heightened risk of a no-brexit deal, EU geopolitical uncertainties and Trump trade concerns. All seem to be holding the Pound back one way or another. We suspect the strength in the Pound will go through the roof once important issues with brexit are sorted. We see no real solid coming out of media to suggest a no deal brexit would eventuate instead political games and jostling. Watch for further brexit speak over the following week with UK-EU talks resuming. The Pound has a quiet week ahead for fundamental news so movement will be based on offshore developments.

Japan

Japanese exports to America have diminished over the past year plunging 5.2% in July from the year earlier. Shipments of cars have slumped by 12.00% - This comes even before Trump's 25% on all auto imports comes into play. Japan's Nikkei traded higher erasing losses on Thursday as news of coming talks between China and the United States at the end of this month. Hopes of easing the prospects of a trade war bought improved risk to currency markets and sending the Japanese Yen lower, closing at 110.50. Drivers of the Yen this week will come from market sentiment with plenty of uncertainty on the table and a lack of local Yen based economic data.

Canada

Canadian CPI released considerably higher than the expected number of 0.1% rising to 0.5% Friday boosting the Canadian Dollar across the board. Against the US Dollar it has rallied to 1.3060 from 1.3160 fuelling CAD demand into the weekly close. Inflation has risen to its highest level since 2011 with tourism and gasoline pushing the rate to 3%. This figure was up year on year from the 2.5% seen for the June quarter. Officials in Canada and Mexico are still hopeful president Trump will extend his flexibility shown to the EU regarding trade issues, will extend through to NAFTA as well. NAFTA is the key component of the Canadian economy with 80% if the country's exports going to the US. Delays with reaching an agreement has weighed on the CAD, once this is sorted we should expect the Canadian Dollar to strengthen accordingly. Monthly Core Retail Sales prints Thursday and should print well, in line with last month’s improvement of 1.4%

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