SMATS FX Weekly Market Report | Monday 31 August 2020

USD

The US Dollar had a torrid time last week as investors started to flood into riskier assets and emerging markets in the first half of the week. The Jackson Hole Symposium caused the Greenback to take further hits against its major counterparts as Fed Chair Jerome Powell announced a major shift in the central bank will move forward to maximize employment and stabilize prices. This week, the US PMI numbers are due out on Tuesday, we expect to see improvements across the board with the headline PMI likely to rise to 53.6 from 50.9 for August. The balance of trade for July is due out on Thursday with expectations set at a contraction from US$-50.7 B to US$-55.4 B. Undoubtably, the biggest driver of the markets this week is going to be the US non-farm payrolls which is expected to show an increase of 1.5 million jobs in August.

Influences on HKD, SGD & AED

The USD has dragged our exotic currencies down with it and we don’t expect any of the data to impact the rates of our exotic currencies this week. The rates will be driven movements of the Dollar but both Singapore and Hong Kong are expecting their August Markit PMIs to rise, showing an expansion in the economy. On Friday, Singapore’s retail sales are also expected to climb by 1.5% month-on-month but contract by up to 13% year-on-year.

AUD

The Aussie Dollar continues its rampage as it gains against most of its counterparts. It is also set to be a big week in terms of data for the Land Down Under with the current account for the 2^nd quarter expected to show a decline from A$8.4 B to A$6.0 B, shortly after that the Reserve Bank of Australia will be making their rate decision during Tuesday’s Asian session. No change is expected but we should pay attention for any commentary from RBA officials. The GDP growth rate is due out on Wednesday for the 2^nd quarter, expectations are that the economy contracted by 8% after contracting by 0.3% in the 1^st quarter. China, Australia’s biggest trading partner will be releasing a whole host of data throughout the week that could cause some volatility in the AUD upon its release.

NZD

The Kiwi Dollar showed some strength last week as the country battles with a second wave of the virus, but it has proved to be successful. This week, the ANZ business confidence for August is expected to fall from -31.8 to -33 when it is released on Monday. The Kiwi Dollar will take cues from the Australian data that is set to be released due to the close trade ties between the two economies. The Global Dairy Trade Price Index is set to be released on Tuesday, after declining by 1.7% the dairy trade has taken a hit but there are rumours that there will be an expansion this week, despite the absence of a market consensus.

EUR

It was a topsy-turvy week for the Euro last week as the German GDP data came out better than expected but the tides started to turn towards riskier assets, allowing for investors to move away from the so-called safe-havens. Italian GDP data is due out on Monday, expectations are looking grim as analysts expect a decline from -5.4% to -12.4% for the 2^nd quarter of the year. Counter-currency flows and global risk sentiment is likely to drive the Euro this week due to the light data on tap.

GBP

The British Pound hit a 10-week high against the Euro amid market optimism and a resurgence in COVID-19 infections in Europe. With the Pound Sterling having a positive correlation with risk appetite, the Fed Speech at the Jackson Hole Symposium allowed the Pound to rise as it continues to shrug off domestic uncertainties. It is set to be a very light week in terms of data for the UK so Pound traders will have to pay attention for any updates in Brexit negotiations and COVID-19 updates.