What’s Happening With Currencies – August 26th
FX markets continue to remain in their relative ranges on one of the summer’s last Fridays. Volatility has remained relatively low – aside from larger swings in both USDCHF and AUDUSD. Both currency pairs have moved higher since the overnight session, rising by an average of 1.5%. Interest in the markets has also been dulled as the East Coast awaits the approach of Hurricane Irene. But, that’s not the only thing headline being made.
1. Following the Jackson Hole Symposium, Fed Chairman Ben Bernanke released statements quelling speculation that another round of quantitative easing is on its way. Recognizing that economic growth continues to remain subpar, Bernanke noted that the Federal Reserve has additional tools to support a higher rate of future growth.
2. US consumer confidence is at the lowest level since 2008 according to the Thomson Reuters/University of Michigan index of consumer sentiment. The index declined to a reading of 55.7 in August from July’s more rosier 63.7.
3. Expansion in the world’s largest economy was weaker than expected in the second quarter. Gross domestic product for the US grew at a 1% annualized rate – falling below 1.1% market estimates. This pace of growth is slower than a previously estimated 1.3% released by the US Commerce Department.
4. UK GDP growth continued to remain on the low side in the second quarter. Expansion in the European economy rose by 0.2% – matching earlier estimates according to the Office for National Statistics.
5. Reserve Bank of Australia Governor Glenn Stevens noted that the country’s lower consumer confidence will likely translate into a slower pace of inflation. The comments helped to shift market sentiment to a more neutral stance – compared to earlier rate reduction speculation.
6. Prices in Japan returned to negative territory in August, declining by 0.2%. The dip was lower than previous estimates – which saw price declines of only 0.1% – and confirms that the economy continues to remain in a deflationary environment.
7. Singaporean industrial production rebounded in July according to the Economic Development Board. Output rose by 7.4% against estimates of a 5% advance. A healthy rebound in pharmaceutical production helped to support the better than expected result.