AUD Consolidating Recent Gains
AUD
The AUD trades fairly level, slightly higher against the majors apart from the AUDGBP, as traders continue to digest last week’s US Inflation release coming in weaker than expected. Asian equities were not too crash hot, all closing in the red with the ASX down -0.2%, the Shanghai Comp down -0.1%, and the Nikkei down the most losing out -1.1%. However, a more positive vibe sentiment on the commodity front with Gold and Silver gaining 0.1% and 0.2% a piece, and Iron Ore blowing the others out of the water gaining 1.8%. With no data yesterday, markets will be looking towards the Monetary Policy Meeting Minutes which will give an indication as to the general outlook of the RBA, after being the first economy to reduce the size of their rate hikes across the world, then following up with another hike of the same size despite somewhat weak inflation data being released days beforehand. There is concern that China’s economy hasn’t been receiving enough policy support from authorities as it struggles under the weight of lockdowns and a slowly unravelling property crisis. Industrial Production y/y and Retail Sales y/y figures are due out today, but are not expected to ease slowdown concerns as a softer print is anticipated for both in October. President Biden met with Xi at a meeting in Bali, with Biden saying he is ready to work with Xi if that is what he desires. President Xi said “we need to work with all nations for more hope to world peace.” Looking ahead, tomorrow Wage Price Index q/q will be an indicator for markets, as it is another gauge of overall inflation and the state of the current job economy in Australia.
USD
AUDUSD trades largely flat, having reached 8-week-highs of 0.6724 before retreating back towards the 0.67 handle, hanging onto it by a thread and trading at 0.6701 at time of writing. A reversal in sentiment was seen for US equities, with the Dow flat, the S&P gaining 0.1%, and the NASDAQ losing out -0.5%. A quiet day for the US in data yesterday, however FOMC member Waller crossed the wires, stating “Given the level of inflation, the US policy rate is not particularly high. So far, rate increases have not broken anything. The Fed can now start to consider moving at a slower pace, with scope to increase by 50bps at either the next meeting or the following.” Tonight, the US will release Empire State Manufacturing Index, PPI m/m, and Core PPI m/m. This will give some insight into whether the previous CPI print was a ‘fluke’, or whether US inflation has begun its decline across the board. FOMC members Cook and Barr will also speak.
EUR
AUDEUR trades sideways this morning, trading relatively range bound between 0.6448 and flirting with the 0.65 handle before being rejected by it, trading at 0.6485 at time of writing. In equities, the DAX and CAC gained 0.6% and 0.2%, respectively. Yesterday, Industrial Production m/m was released out of the Eurozone, beating expectations of 0.1% and printing a result of 0.9%. The ECB’s Panetta said “aggressive tightening is not advisable and inflation risks should not be underestimated.” This evening, France will release its Final CPI m/m which is expected to come in at 1%, and Germany will release the ZEW Economic Sentiment data. The Eurozone will also release data on Flash GDP q/q, and Trade Balance. Across the channel, the Euro’s recovery above parity against the US dollar might lose momentum amid mostly second-tier releases on the European calendar. The second reading of Q3 GDP will help investors get a better idea of how the Eurozone economy is riding out the energy and inflation storm. However, Thursday evening’s final estimate of October inflation is the only one that’s likely to spur some reaction in the Euro, but only if there is an upward revision.
GBP
AUDGBP trades higher this morning, reaching over one-month-highs of 0.5724, before consolidating slightly and losing the 0.57 handle to trade at 0.5698 at time of writing. The FTSE had encouraging gains in comparison to its peers, gaining 0.9% - the highest amongst the equity index’s. The pound will likely attract the most attention for the rest of the week in what will be a busy period for the United Kingdom, as apart from the economic releases, the budget statement will be watched amid lingering worries about high borrowing. It’s been a tumultuous period for the Sterling these last couple of months and the rest of this week could again be a bumpy one. Aside from the fact that the week is jam-packed with key economic gauges, the government will unveil its much-anticipated Autumn statement. According to reports, the new chancellor, Jeremy Hunt, is planning to announce a combination of spending cuts and tax increases to fill a fiscal hole that was exacerbated by the mess created by the prior administration. Regardless, it will be hard for the currency to ditch its clouded outlook entirely as the incoming data is expected to confirm a deteriorating economic backdrop with too high inflation. The employment report for September [Claimant Count Change / Average Earnings Index 3m/y / Unemployment Rate] is up first on Tuesday, to be followed by the CPI and PPI data for October on Wednesday. Retail Sales figures will round up the week on Friday.
NZD
Trades sideways this morning, briefly reaching the 1.10 handle and facing some heavy resistance, retreated slightly to trade at 1.0989 at time of writing. Yesterday across the ditch, we saw BusinessNZ Services Index which improved from a previous 55.9, printing at 57.4. (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was up 1.5 points from September, and clearly above the long-term average of 53.6 for the survey. BusinessNZ chief executive Kirk Hope said that the survey has now remained above the 55-point mark for three consecutive months, with the two key sub-indexes of New Activity/Sales (61.0) and New Orders/Business (59.9) remaining in a very healthy position. In addition, Employment (57.0) experienced its highest level of activity since April 2021. In line with an improvement in expansion levels, the proportion of positive comments for October (55.4%) was up on September (47.9%). Seasonal influences were mentioned by a number of respondents, including improved weather conditions and upcoming planning before Christmas. BNZ Senior Economist Craig Ebert said that “the latest NZ PSI and PMI results chime with the narrative of spending shifting back to services, away from durables. However, they also highlight a divergence to what’s been going on globally, with respect to services industries”. Visitor Arrivals data was released this morning, smashing it’s previous result of -3.3% with an impressive 16.6%. Looking ahead, tomorrow we will see the release of the GDT Price Index.