Greenback Favored as Political Uncertainty Mounts | Daily FX Commentary

• Aussie dollar retreats as geopolitical events favour safe haven currencies;
• Sterling moved higher against higher yielding counterparts;
• Thin volumes and political uncertainty favour US dollar.

The Australian dollar came under some pressure yesterday as global political events in the Middle East, Ukraine and Russia continue to steal the headlines and traders favour safe haven currencies. The Aussie traded below the key $0.94 cents handle for the day with losses extended throughout the US session overnight, a theme that is likely to continue amid such political uncertainty. Punters will be keen to see the RBA’s Glenn Stevens speak in Sydney this afternoon but we can only expect to hear much of the same, especially with high volatility CPI data on the docket tomorrow.

Whilst struggling to make headway against the greenback, Sterling was broadly supported against the higher yielding currencies, despite a lack of data for direction. Heightened expectations of a rate hike have led to a resilient pound in recent months and despite data yesterday which showed the UK property market to have slowed in July, Sterling bulls dismissed the likelihood of the data effecting interest rate movements. As we approach the release of BoE minutes tomorrow, a string of public spending and borrowing data should cause some activity in this evening’s sessions.

In a quiet session yesterday with little data for markets to follow, the greenback came out on top amid political uncertainty. Data from the US this evening is expected to show Consumer Prices have held their fastest pace since October 2012. We can expect to see headline CPI show an increase of 0.3% MoM with YoY inflation steady at 2.1%. CPI data will undoubtedly steal the headlines as the Fed moves closer to raising rates, however traders should remain aware of subsequent existing home sales data which is always a market mover.

[B]Tom Williams
Sales Trader[/B]

Very interesting insight, lets see how the USD keeps behaving.