Sea of Red for Aussie Dollar
AUD
Aussie Dollar opens down against most majors amidst increased global volatility and weakened risk sentiment. The ASX closed the session down -1.4% in a broad sell-off led by utilities and technology stocks, while Asian equities closed overwhelmingly in the red, with the Hang Seng the worst performer down -2.8%. In commodities, Gold and Silver remained relatively flat at 0.0% and 0.2% respectively, while SGX Iron Ore and ICE Sugar fell -0.9% and -0.4%. Today, we see monthly updates on consumer and business confidence. While Consumer Confidence may remain subdued, eyes will be on the ‘Time to buy a dwelling’ measure to see if September’s modest improvement is sustained. Last month, NAB’s closely watched business survey reflected strong conditions, apparently unaffected by soft PMI data. We may see that gap narrow in today’ release. In China, yesterday’s data came in largely on market expectations failed to move markets. The M2 Money Supply y/y came in at +12.1%, furthering the steady increase, while the value of new yuan-denominated loans issued last month was 1,810B. No other Chinese data is projected until Friday, being CPI y/y, PPI y/y and Trade Balance figures.
USD
The AUDUSD continues the one-way traffic, having reached 2y lows of 0.6275 and trading at 0.6299 currently. Equity markets started the week on the back foot, while bond markets were closed due to the Columbus Day holiday. The NASDAQ closed -0.9%, the S&P 500 -0.7% and the Dow Jones -0.2% amidst weakened risk sentiment. Crude Oil dipped -1.5% to finish the session at $91.20 a barrel, still largely up since OPEC+ released supply cuts in the aftermath of EU price caps. Brainard said in a speech early this morning that tighter US monetary policy has begun to be felt in an economy that may be slowing faster than expected. She said, however, that the full brunt of Federal Reserve interest rate increases still won't be apparent for months. To the day ahead, we see the National Federation of Independent Business Index expected at 91.2, being a survey of small businesses gauging the relative level of economic conditions. Given the seemingly almighty USD as of late, the expected figure continues recent optimistic trends. Moving forward, the underlying narrative of a hawkish Fed, paired with lingering geopolitical and energy price concerns, could keep risk sentiment weak and safe-haven flows into the greenback strong.
EUR
The AUDEUR opens down at 0.6492, having touched 6 months lows of 0.6472. The DAX and CAC relatively flat at 0.0% and -0.4% respectively. Little in the way of data yesterday with Sentix Investor Confidence signaling unchanged difficult conditions. The measure came in at -38.3, falling short of expectations of -34.9, and reflecting the most pessimistic figure since May 2020. ECB’s Knot commented that markets seem to underestimate the upward risks in the inflation outlook. He sees a significant step in the October rate meeting. Some brief EUR strength experienced as German Chancellor Schulz indicated Germany would support joint EU debt for loans to tackle the energy crisis. There are no major market-moving data releases this week, although we expect a plethora of ECB speakers. Tonight, Italian Industrial Production m/m is tipped at 0.0%.
GBP
The AUDGBP opens down at 0.5695, with the FTSE down -0.5%, as the BOE announces fresh measures to keep the UK’s financial markets functioning. In preparation to end emergency support on Friday, the BOE has pledged to increase the maximum auction size of its debt (bond) buy-backs, doubling from 5bn to 10bn per day. UK Chancellor Kwarteng has announced the medium-term fiscal plan will be published on October 31, and the Office for Budget Responsibility forecast has been commissioned for that date. Today’s job data will be the highlight of the week, with Average Earning Index 3m/y expected at 5.9% and Claimant Count Change expected largely up at 4.2k, further signaling a gradually weakening labor market in the UK.
NZD
The AUDNZD capping off what was a dismal session for the Aussie, falling to 0.1308 this morning even with complete radio silence from the Kiwis yesterday. The bearish move likely attributed to overwhelming risk sentiment deterioration hurting the AUD currently. The quiet start to the week will continue, with September’s Visitor Arrivals m/m expected on Wednesday up +41.8%. Thursday brings us Food Price Index data, while we expect the BusinessNZ Manufacturing Index on Friday.