Bank of England

Monetary Policy and Economic Data Put the Pound and the Dollar in Focus

Earlier in the Day:

It’s was a busy start to the day on the economic calendar this morning. The Aussie Dollar, the Kiwi Dollar, and the Japanese Yen were in action.

For the Kiwi Dollar

2nd quarter GDP numbers were in focus this morning, as the markets look ahead to next week’s RBNZ policy decision.

In the 2nd quarter, the economy contracted by a record 12.2%, quarter-on-quarter, following a revised 1.4% contraction in the 1st quarter. Economists had forecast a 12.8% contraction.

According to NZ Stats,

  • New Zealand started the June 2020 quarter in alert level 4 lockdown, with restrictions on the activities of households and businesses.
  • Social distancing controls eased on 8th June while NZ borders remained closed in the quarter.
  • Industries including retail, accommodation & restaurants, and transport saw significant deterioration.
  • Other industries such as food and beverage and manufacturing were essential services and less affected.
  • Household spending in the quarter tumbled by 12.1%.

The Kiwi Dollar moved from $0.67337 to $0.67361 upon release of the numbers. At the time of writing, the Kiwi Dollar was down by 0.59% to $0.6693.

For the Aussie Dollar

Total employment increased by 111.0K in August, following a 114.7k rise in July, Economists had forecast a 50.0k fall.

Full employment rose by 36.2%, following a 43.5k increase in July. In July, the unemployment rate slid from 7.5% to 6.8%. Economists had forecast an unemployment rate of 7.7%. In July, the unemployment rate had risen from 7.4% to 7.5%.

According to the ABS,

  • The number of unemployed people decreased by 86,500 people.
  • Compared to July 2019, full-time employment declined by 234,200, with part-time employment falling by 104,100.
  • The employment to population ratio increased by 0.5 points to 60.3%.
  • While the unemployment rate fell, the participation rate increased by 0.1 points to 64.8%.

The Aussie Dollar moved from $0.72816 to an early high $0.73112 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.41% to $0.7276.

For the Japanese Yen

The Bank of Japan left interest rates unchanged, which was in line with market expectations. Next up, the all-important press conference.

The Japanese Yen moved from ¥105.046 to ¥105.069 upon the BoJ policy decision. At the time of writing, the Japanese Yen was down by 0.10% ¥105.06 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include finalized August inflation figures for the Eurozone.

Barring marked deviation from prelim figures, the stats should have a muted impact on the EUR.

Expect market reaction to the FOMC economic and interest rate projections and press conference to continue to influence.

Closer to home, Brexit chatter and the BoE will also be of influence on the day.

At the time of writing, the EUR was down by 0.44% to $1.1764.

For the Pound

It’s not a busy day ahead but a big day ahead on the economic calendar. While there are no material stats due out of the UK, the BoE will deliver its September monetary policy decision this afternoon.

Recently gloomy chatter has raised the prospect of some dovish commentary and the possible talk of further support. With Brexit yet to have a clear path and the UK reintroducing containment measures, plenty of uncertainty remains.

It remains to be seen, however, whether there will be the promise of a near-term move. The vote count may be the 1st clue. Expect any dissent in favor of a rate cut to pressure the Pound.

The monetary policy meeting minutes will be the key guidance on what lies ahead, however.

On the Brexit front, updates on the passage of the Internal Market Bill will also influence.

At the time of writing, the Pound was down by 0.34% to $1.2923.

Across the Pond

It’s also a relatively busy day ahead for the U.S Dollar. Key stats include September Philly FED Manufacturing Index numbers and the all-important weekly jobless claims figures.

While we have seen market sensitivity to the Philly numbers, expect the jobless claims numbers to have the greatest impact.

Other stats include August building permit and housing start numbers. We would expect the stats to have a muted impact on the Dollar, however.

Away from the economic calendar, geopolitics will also influence.

The Dollar Spot Index was up by 0.26% to 93.452 at the time of writing.

For the Loonie

It’s a quiet day ahead, with no material stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of geopolitics and continued reaction to the FED.

At the time of writing, the Loonie was down by 0.37% to C$1.3227 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.