Central Banker’s Take the Driver's Seat | Daily FX Commentary

• Aussie dollar struggles to maintain $0.94 ahead of RBA minutes;
• Little data overnight to drive greenback ahead of Yellen testimony;
• Sterling continues to slide against greenback as traders pare bullish bets.

In a quiet start to the week, data was scarce and left local markets with little to follow throughout yesterday’s Asian session. The Aussie dollar met resistance at $0.94, most likely attributable to Glenn Stevens’ interview with ‘The Australian’ newspaper over the weekend where his dovish rhetoric continued. The market expects few surprises from the minutes of the July meeting and any further comment on strength of the local unit is likely to be dismissed as markets continue to believe that the RBA will retain a neutral stance on monetary policy as economic data suggests that a rate cut is unlikely.

As markets await Fed Chairwoman Janet Yellen’s testimony to commence this evening, trade in the greenback was fairly cautious overnight. Comments from ECB President Mario Draghi overnight saw the Euro gain ground against the greenback as it was suggested that additional credit will be given to banks in an attempt to boost credit throughout the economy. Gains came despite warnings from Draghi that currency appreciation is ‘a risk to the sustainability of the recovery’. In terms of what to expect from Janet Yellen this evening, we are starting to see some light at the end of the tunnel for the US economy and data is beginning to point towards a change in monetary policy. Any indication of change in the Fed’s stance will likely lead to broad dollar strength.

Sterling has struggled to hold onto gains after approaching 6-year highs in recent weeks as bullish bets from hedge funds dwindles last week. A pull-back in Sterling strength is likely to be temporary as traders take profits and reassess UK economic data. The release of inflation data this evening will likely show that consumer prices have edge closer to the Bank of England’s target of 2%. Any indication that prices rose more than 1.6% (YoY) will encourage Sterling strength but markets may hold off until the release of labour market data tomorrow.

Despite a string of data from both the UK and US overnight, Central Bankers are in focus tonight with Mark Carney speaking at 19:00 AEST and Janet Yellen’s testimony to Congress beginning at 00:00 AEST.

[B]Tom Williams
Sales Trader[/B]