• Capex data indicated some non-mining led success among Australian companies;
• Euro weaker across the board amid weaker data and geopolitical uncertainty;
• USDJPY weaker despite encouraging US data as Ukraine/Russia tensions escalate.
A drop in new home sales was unexpected yesterday in yet further evidence that the Australian property boom is slowing. However, data was swept aside as private capital expenditure (capex) data suggested that the Australian economy is seeing some success in a transition from mining led investment as the seasonally adjusted estimate for new capital expenditure rose 1.1% in the first quarter. Adding further support to the Aussie dollar, we saw the local currency climb to $0.9374 against the greenback as traders seemed somewhat comfortable that the Aussie remains supported at current levels. The Aussie appears to have met resistance at its monthly highs and we could see come selling pressure around current levels as traders await a string of economic data next week.
EURUSD appeared to meet some aggressive sellers above $1.3220 as European data failed to inspire a relief rally ahead of next week’s ECB meeting. Recent price action has suggested that markets don’t expect Mario Draghi to announce QE at next week’s meeting, however stagnant German August inflation data and economic sentiment across the Eurozone at 8-month lows was enough to see the fragile currency fall out of favour. CPI data from the Eurozone this evening is expected to show that inflation across the region continued on a downward spiral this month, dropping from 0.4% in July to 0.3% in August. Regardless of whether the ECB announce QE plans this month or next, unless we see a surprise uplift in CPI this evening I can’t see the Euro maintaining levels above $1.32 for long as monetary stimulus is still the inevitable outcome.
As geopolitical risks between Ukraine and Russia controlled sentiment overnight, the greenback lost some ground, particularly against the Japanese Yen in a flight to safety. USDJPY traded as low as 103.55 overnight. Political tensions aside, economic data from the US was taken positively with secondary Q2 GDP showing an expansion of 4.2% vs expectations of 3.9%, a drop in jobless claims and a monthly uplift in pending home sales all demonstrating a continued US economic recovery. There is plenty for traders to keep an eye on in the coming trading sessions with Japanese CPI and unemployment data this morning, EU CPI and inflationary indicators from the US overnight.
[B]Tom Williams
Currency Analyst[/B]