Daily Currency Update

USD - United States Dollar

The US dollar has traded within modest guiderails this morning with major currencies.

With little of note driving the move, it is clear sentiment continued to govern direction, while underlying macroeconomic fundamentals took a back seat. Investors have responded to headlines rather than data sets. We’d expect a heightened likelihood of ongoing volatility across currency markets as we move into the final quarter of the year.

Back to market fundamentals, the prices of finished good and services sold by
producers in the US increased by 0.3% in August. Core PPI was forecast to only increase 0.2%. When the actual is greater than the forecast, its expected to be good for currency.

The Core PPI is an indicator of consumer inflation. As producers charge more for goods and services, the higher costs are passed on to the consumer.

Key Movers

European Central Bank announced this morning that it will not cut rates in the short term. It will hold the monetary policy option as a backup in the medium term in case the continent is required to once again fully lockdown. Ideally for ECB President Christine Lagarde, Q3 will bring with it a spread of better data, and will restore some confidence into the bloc. A 10-basis point cut has already been priced into the market for 2021, however this may not be needed.

The Australian dollar rallied through trade on Wednesday, recouping losses and pushing back toward 0.73 US cents. Having struggled to maintain any upward momentum throughout the domestic session the risk-off backdrop abated overnight allowing the Australian dollar to follow equities and other risk assets higher. Having touched intraday lows below 0.72 the AUD pushed through 0.7250 to touch 0.7290.

Expected Ranges