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FOMC to take centre stage amid flat start

BY JOEL HOLMES

Spending the majority of last week up above the 79 US Cents mark the Australian dollar was buoyed by revelations that domestic policy makers remain relatively upbeat when referencing Australia’s economic trajectory. Whilst retaining fears over the level of household debt the impacts of a stronger currency also received some air-time. Topping out at an eventual high of 0.7943 towards the back end, this week’s economic calendar is notably void of any tier one milestones with the main jolts to underlying volatility expected to be generated from over-seas sources.  In what’s shaping up as a quieter start, the AUD currently buys 79.26 US Cents.

The New Zealand dollar advanced against the greenback on Friday as news spread that US President Donald Trump had dumped his political adviser Steve Bannon. The kiwi reached a high of 0.7314 on the back of the announcement. Looking ahead this week on the data front and it all starts with today’s monthly Visitor Arrivals data for July. Then on Wednesday traders will be watching for the monthly Trade Balance release for July. Finally on Thursday the central bank will meet at Jackson Hole where Federal Reserve chair Janet Yellen is due to speak. Investors will be looking for signs of how quantitative easing will end. The NZD/USD pair is currently trading at 0.7309. We now expect support to hold on moves approaching 0.7220 while any upward push will likely meet resistance around 0.7330.

The Great British Pound traded in a lacklustre range for the majority of last week after failing from the 1.30 handle in the aftermath of a lower than expected inflation reading in the UK. Falling to a one-month low against the Greenback, the Sterling could not recover as it consolidated between 1.2830 and 1.2910. On the domestic front this week, investors will be keen to see the release of second-quarter GDP figures on Thursday. Recent news suggests BOE Governor Carney will not be in attendance at this year’s Jackson Hole Symposium where central bankers discuss monetary policy. The Sterling opens this morning at 1.2870 against the US Dollar.

In a week which was dominated by political uncertainty, escalating concerns over Donald Trump’s administration has been the biggest driver of markets over the past five days. Managing to pull the S&P 500 down to its lowest level in more than a month, it’s been politics not economics which has triggered the sell-off, as demand for assets deemed riskier in nature dried up. Firming in the face of adversity, the worlds reserve currency has impressed over the past five days, in most part holding onto the upward trend initiated earlier in month. Whilst the Euro has lost ground, losing 0.5 percent versus the Greenback (1.1757) all eye’s this week will be on US Federal Reserve’s annual policy conference in Jackson Hole, Wyoming. With the biggest reaction likely to come should Janet Yellen announce a time-frame for balance sheet reductions – Greenback values will be sensitive to the rhetoric delivered on Friday.