Currencies Largely Unchanged Despite Overnight Data

There was no shortage of data last night, any one piece of which, on a normal day, would be headline worthy. However, with tomorrow’s hotly anticipated ECB Press Conference, markets seem to be too preoccupied to pay much attention to anything else. 


Australia’s quarter-over-quarter GDP growth printed 0.6% last night, missing expectations of a slightly better result.  Last night’s number is a bit of a contrast to the last GDP report, which put economic expansion for the island nation at 1.4%. While the overnight number is only a single data point, given the instability in Europe and the USA, the cooling Chinese economy, and the potential impact on commodity prices, policymakers are sure to be nervous. This put the Australian unit on its back foot through the Asian trading session, primarily giving up ground to the Greenback, euro, and yen. The AUDUSD hit an eight-week low after breaching the 100-DMA near 1.0200, though rumours of stops in the 1.0150 area and speculation about the ECB seem to have stemmed the tide for the moment.


Turning to Europe, a host of Service PMI numbers were released, all of which were sub-50, indicating a state of contraction in the services industry. The common currency largely shrugged this off, with traders instead focusing on tomorrow’s ECB announcement. While it’s unlikely that the PMI results are likely to change Draghi’s mind about whatever he has planned for tomorrow’s press conference, they do add weight to the argument that it’s time for the ECB to step in.


And finally, Switzerland’s August CPI read flat.  While Swiss CPI has been erratic over the last couple of years, oscillating regularly between positive and negative results, this is the third month in a row that the country has exhibited deflationary pressure. This fact eases some of the pressure on the Swiss National Bank and validates their interventionist policies to stem the flight-to-safety rally in the EURCHF. The 20% rally in value that the Swiss franc experienced as the situation in the euro zone deteriorated could mean a major economic drag for the landlocked nation, due to its goods becoming relatively more expensive abroad. The floor at 1.2000 instituted earlier this year by the SNB seeks to stabilize the Swiss economy and prevent runaway deflation.