AUD Slips Some More
The much-anticipated Jackson Hole speech was dovish as expected, but did not deliver clarity on the timing of any future round of easing. Nevertheless our US economists now expect that if further easing does indeed come through, it will probably take the form of asset purchases (rather than a BoE-style targeted lending program designed to encourage US banks to lend to the real economy). Nonetheless, we note that September action is not a done deal, and another strong unemployment report on Friday could yet stay the Fed’s hand. Our economists expect a +135k gain in nonfarm payrolls for September, and the unemployment rate to stay at 8.3%. For now, attention will likely gravitate back towards Europe ahead of the ECB’s policy meeting on Thursday. While ECB President Draghi is likely to reveal more about the new bond buying program currently being designed, we doubt the full details will be available in time for Thursday’s policy decision, and any vagueness on key points such as eligible tenors and ECB seniority will likely trigger some euro selling. The program’s complexity and the lack of time available to finalise the design suggest that optimism for what may emerge on Sept. 6 is unwarranted, as do lingering uncertainties surrounding the upcoming German constitutional court
decision and Spain’s position regarding an aid request. In Asia meanwhile, the Australian dollar saw some selling overnight in the wake of the soft China manufacturing PMI over the weekend. A weak Australian retail sales report did nothing to restore confidence. Ahead on Monday, more PMI results are due, while SNB’s Jordan and ECB’s Draghi are scheduled to speak.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank