WEEKLY FX WRAP – Commodity currencies reach multi year lows with USD and GBP coming off their highs, while next week sees the FOMC rate decision and a host of tier 1 data
The most notable move in FX markets this week has been among commodity currencies with the likes of AUD and CAD reaching multi year lows against the USD as the price of both oil and metals continue to tumble. The week kicked off with a sharp selloff in gold amid no fundamental news, with the yellow metal then going on to trend lower throughout the week, with weakness also seen across the likes of platinum, copper and iron ore. Meanwhile, WTI and Brent continue to trend lower after the Iran agreement seen last week, breaking below USD 50 and USD 55 respectively.
While AUD and CAD have both seen multi year lows this week, NZD has strengthened throughout the week despite the RBNZ cutting the OCR by 25bps. This comes as the NZD was already at multi year lows after weak CPI and GlobalDairyTrade milk auctions last week, while markets were one-sided heading into the decision, with the central bank also omitting its statement that the currency was at an unjustifiable level.
Elsewhere, the USD has also come off its highs this week amid light newsflow and being weighed upon by US earnings out of the US, with some suggesting that the relatively downbeat earnings mean that the US economy is not strong enough to withstand a Fed rate hike. Next week sees the Fed rate decision, with most still believing it is too soon for a rate hike, while the vote itself may be considered a non-event, participants will be looking at the accompanying statement to see if there is any change of language or rhetoric. Of note, there is no press conference scheduled after the decision, with just a statement to be published.
GBP has also come off its highs this week after a recent bout of strength that saw GBP/USD above 1.5600 and EUR/GBP below 0.7000. GBP softened after the BoE minutes showed a 9-0 vote in favour of keeping rates on hold before UK retail sales showed the weakest spending growth since 2013.
As well as the Fed rate decision next week sees a host of tier 1 data in the form of GDP readings from UK and US, US Durable goods and German IFO, unemployment and CPI.