Talking Points
Aussie, NZ Dollars Fall with Asian Stocks Amid US Policy Uncertainty
Euro May Rise After German IFO Data on Waning ECB Easing Outlook
US Dollar Looks to Consumer Confidence Print to Drive “Taper” Bets
The Australian and New Zealand Dollars declined in overnight trade as Asian stocks followed Wall Street lower, pulling the sentiment-geared currencies along for the ride. The MSCI Asia Pacific regional benchmark equity index fell 0.9 percent. The news-wires chalked up the move to uncertainty over US economic policy.
On the fiscal side, debate is heating up over an increase of the federal spending limit (the so-called “debt ceiling”) once again. Eleventh-hour wrangling over the issue prompted ratings agency Standard & Poor’s to strip the US of its AAA credit rating while citing political dysfunction in 2011. Investors have since taken a cautious posture when similar arguments arise, worrying that constant brinksmanship may soon end in tears.
Meanwhile on the monetary policy side, speculation about the timing of a move to “taper” QE3 asset purchases has been reset by last week’s unexpected FOMC outcome. Conflicting messages from a flurry of Fed policymakers speaking over the past 24 hours did little to demystify the central bank’s intentions. Reasonably enough, investors’ response to the uncertain landscape looks to have been a pullback on exposure to risky assets until further clarity emerges.
Looking ahead, Germany’s IFO survey of business confidence headlines the economic calendar in European hours. Expectations call for the headline Business Climate gauge to rise for a fifth consecutive month in September, marking the highest level since April 2012. Signs of firming sentiment in the Eurozone’s largest economy may weigh against expectations for additional ECB stimulus, boosting the Euro.
From there, the spotlight turns back to the US docket, where consensus forecasts are calling for the Consumer Confidence gauge to edge lower in September. Softer economic data that argues against a move to reduce QE asset purchases in the near term stands to weigh on the US Dollar. Needless to say, an upside surprise is likely to produce the opposite result.
New to FX? Watch this Video. For live market updates, visit the Real Time News Feed
Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
5:00
JPY
Supermarket Sales (YoY) (AUG)
0.1%
–
-0.5%
Euro Session:
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
8:00
EUR
German IFO – Business Climate (SEP)
108.0
107.5
Medium
8:00
EUR
German IFO – Current Assessment (SEP)
112.5
112.0
Medium
8:00
EUR
German IFO – Expectations (SEP)
104.0
103.3
Medium
8:30
GBP
BBA Loans for House Purchase (AUG)
38950
37200
Low
Critical Levels:
CCY
SUPP 3
SUPP 2
SUPP 1
Pivot Point
RES 1
RES 2
RES 3
EURUSD
1.3361
1.3435
1.3464
1.3509
1.3538
1.3583
1.3657
GBPUSD
1.5878
1.5957
1.6000
1.6036
1.6079
1.6115
1.6194
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
To receive Ilya’s analysis directly via email, please SIGN UP HERE
Contact and follow Ilya on Twitter: @IlyaSpivak
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.Learn forex trading with a free practice account and trading charts from FXCM.
Source: Daily fx