Global outlook
The USD index hit three-month highs on Friday as Federal Reserve chair Jerome Powell adopted a tough stance at his closely watched Jackson Hole speech. US bond yields climbed as Powell signaled US interest rates were likely to remain higher for longer. The greenback gained while the Australian and New Zealand dollars closed at the lowest level in nine months.
Powell says fight against inflation has a “long way to go”
The US dollar extended its recent climb with the USD index reaching three-month highs on Friday as Federal Reserve chair Jerome Powell adopted a tough posture at his highly-anticipated Jackson Hole speech.
Powell said the Fed is focused on its 2.0% goal for inflation and the central bank was “prepared” to hikes rates further “if appropriate”.
Importantly, Powell also said rates would likely to be higher for longer, saying the fight against inflation still has a “long way to go”.
US bond yield pushed higher, with short-term yields lifting the most, and the USD index reached the highest level since late May.
Aussie, kiwi both close at lowest levels since November
As the US dollar gained, regional currencies were pressured.
The AUD/USD fell 0.3% as it closed at the lowest level since 3 November.
The kiwi was also hit with the NZD/USD similarly down 0.3% and ending at the lowest level since 9 November.
The USD was mostly higher in Asia although the USD/SGD fell.
The European markets were particularly hard hit as markets wound back expectations for further rate hikes.
US jobs key for USD outlook
This week’s main focus will be on US data.
GDP numbers are due on Wednesday night with markets looking for US June-quarter growth to sit at a robust 2.4% at an annualised rate.
However, the main driver is likely to be US employment. US JOLTS is due on Tuesday, ADP jobs on Wednesday and the all-important non-farm employment due on Friday. US labour market data has started to ease but a substantial turn has not yet been seen.
Australia also has major events due with Wednesday’s monthly inflation numbers likely to be the highlight.
USD index at three-month highs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 August – 2 September
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
