AUD lower as Global PMIs Miss Expectations
AUD
AUD is weaker across the board this morning apart from against the Kiwi, struggling to hang on to any of its gains over the weekend. Asian equities finished the session mixed with the Hang Seng underperforming falling 6.5% with technology companies among the worst affected. The ASX was +1.5% on the close in a broad-based rally led by Materials stocks which finished +2.5%. A relatively weak session for commodities, with Gold and Silver losing -0.1% and -0.2% a piece, Iron Ore gained a measly 0.1%, and Copper was hit the worst, losing out -1.2%. Yesterday in data, the S&P Global Flash Australia Manufacturing PMI posted 52.8 in October, down from a final reading of 53.5 in September. This marked the twenty-ninth successive month in which conditions in the manufacturing sector strengthened. Additionally, the S&P Global Flash Services Business Activity Index eased to 49.0 in October, from 50.6 in September, to indicate the first contraction of the service sector since January. RBA Deputy Gov Kent spoke yesterday, mentioning “Australian offshore debt is well hedged, higher U.S. rates should not affect local bank borrowing costs. Additionally, while AUD$ down 14% on US$ this year, its trade weighted index (TWI) has fallen only 2%.” In Chinese data, GDP q/y increased significantly at 3.9%, compared to a 3.3% forecast. However, Retail Sales printed weaker, with a result of 2.5% against an expected 3.1%. China's Xi Jinping secured a precedent-breaking third leadership term on Sunday and introduced a top governing body stacked with loyalists, cementing his place as the country's most powerful ruler since Mao Zedong, Reuters reported: ''Xi faces stiff challenges as the world's second-largest economy slows and frustration over his zero-COVID policy grows. China is also increasingly estranged from the West, exacerbated by Xi's support for Russia's Vladimir Putin and mounting tensions over Taiwan.'' Looking ahead, the Labor Government’s budget will be released, with Macquarie Strategy expecting the Government to use the Budget as a platform to garner support for future fiscal consolidation and reshaping of the budget. The Government is expected to incorporate a range of election promises into the forward estimates and make some expected savings with respect to the previous government’s plans. New estimates for the cost of “Stage 3” income tax relief from mid-2024 (~AUD10bn higher over a decade) and upward revisions to the cost of the National Disability Insurance Scheme (and other programs) will also be captured.
USD
AUDUSD trades lower this morning, giving up gains made at the end of last week and briefly losing the 0.63 handle before opening higher at 0.6308 at time of writing. Wall St rallied overnight with the Dow Jones gaining 1.2%, the S&P 500 1.1% and the NASDAQ +0.7%. US yields were unchanged, as was crude oil which closed at $84.70 a barrel. Nothing to report in data out of the US yesterday, however last night Flash Services PMI and Flash Manufacturing PMI were both released. Manufacturers and services providers’ views on the outlook also deteriorated in October, leading the composite future index to fall to its lowest level since September 2020. The measure of business activity at service providers slid to 46.6 in the month, marking the second-worst reading since May 2020. Firms attributed the decline to weak client demand, rising interest rates and stubborn inflation, the report showed. Meanwhile, the Flash Manufacturing PMI dropped to 49.9. While barely indicating contraction, the figure was the weakest since mid-2020. The group’s gauge of new orders at factories contracted for the fourth time in five months. Output expanded modestly. Last night, Treasury Secretary Yellen spoke, stating “The U.S. Treasury is taking steps to strengthen the resilience of the Treasury debt market and private money market and bond funds, but the U.S. financial system is functioning well despite elevated global volatility.” Looking ahead, all eyes will be focused on the GDP data being released tomorrow evening out of the US.
EUR
AUDEUR trades down this morning, having forfeited its 0.64 status and dipping to over one-week-lows of 0.6366, before recovering slightly to trade at 0.6386 at time of writing. In equities, the DAX and CAC both gained 1.6%, a strong result. In data out of the Eurozone, Manufacturing and Service PMI data was released for October. In France Manufacturing printed at 47.4 (47 expected) and Services was 51.3 (51.5 expected). German Manufacturing PMI was 45.7 (47 expected) and Services 44.9 in line with expectations. In the Eurozone, the Manufacturing print was 46.6 (47.9 expected) and Services was 48.2 in line with expectations. Today in data, we will see German ifo Business Climate released this evening. Looking ahead, markets will look to Thursday evening’s data whereby the Monetary Policy Decision will be released.
GBP
AUDGBP trades weaker this morning, touching almost one-week-lows of 0.5540, before recuperating to trade at 0.5582 at time of writing. In equities out of the UK, the FTSE gained 0.6% - falling short of the performance of its European counterparts. In data out of the UK, Flash Manufacturing PMI and Flash Services PMI were both released. Manufacturing was 45.8 (48 expected) and Services 47.5 (49 expected). BOE’s Ramsden hit the wires saying that the central bank do not target the value of the pound, though take into account its affect on inflation. He also noted that the PMI data was consistent with an economy in recession. Headlines announced that Rishi Sunak would become the next UK PM after Penny Mordaunt conceded the leadership and expressed her full support for Sunak. Looking ahead in data, MPC Member Pill will hit the wires this evening.
NZD
AUDNZD trades slightly higher this morning, bucking the trend of its peers, trading within the 1.10’s throughout the session, being traded this morning at 1.1080. Yesterday was quiet across the ditch, as it was a Kiwi Bank Holiday. A silent day today in the way of data, and a very quiet week overall. However, looking ahead, the ANZ Business Confidence Index will be released tomorrow, with a previous result of -36.7. Above 0.0 indicates optimism, and below indicates pessimism.