The USD rose across the board on Friday amidst a backdrop of global risk aversion and a pullback in US equities. The greenback, along with the safe haven Yen and Swiss Franc were the primary beneficiaries of the deterioration in risk sentiment, with the USD index testing 18-month highs even as US treasury yields retreated. The sharp fall in the British pound, and by association the Euro, also aided the greenback’s advance as the impact of ongoing Brexit concerns continue to be felt globally. These moves see the USD open this morning buying 1.3847 Australian dollars and 0.7741 Sterling.
The equity market story was an interesting one, as US stocks gave up some of their weekly gains on Friday with the S&P and NASDAQ closing down 0.9% and 1.6% respectively with no obvious catalyst. Macro data was also broadly strong, US PPI ex food and energy came in a lot firmer than expected although it’s worth noting the bulk of the strength in the read was due to traditionally volatile items, confirmed by the core measure coming in at expectation. The University of Michigan’s consumer confidence index also remained at elevated levels despite recent volatility in equity markets.
Monday is set to be a quiet one for the greenback due to the veteran’s day holiday; markets are open however lower liquidity is expected. Key risk events for the week ahead are Wednesday nights CPI read as well as Thursday nights retail sales numbers which will be watched closely by traders who are expecting the domestic economy’s rosey outlook to be confirmed. Of particular interest on Wednesday will be US Fed Chair Powell’s speech, especially after his hawkish comments from last month during an interview with CNBC.
On the technical front, AUD/USD resistance is still solid at the 0.7300 figure with downside supports clearly evident at 0.7200 and the September 5 low of 0.7144.