AUD Softens Across the Board
AUD
The Aussie dollar opens down against majors despite strong domestic labour force data yesterday. The Unemployment Rate decreased by 0.1% to almost 50 year lows of 3.4%, despite the economy adding approximately +32.2k jobs, doubling expectations of +15k and underscoring the resilience of the economy amid a record series of interest rate hikes by the RBA. The latest figures reflect persistently tight labour market conditions and will likely raise expectations the RBA will raise interest rates again at their next meeting on December 6. Sean Langcake, head of macroeconomic forecasting at BIS Oxford Economics said “The RBA will likely want to see more of a tapering in demand to avoid a sharp breakout in wage growth”. The ASX closed +0.2%, led by Consumer staples and healthcare stocks, while Asian equities finished largely in the red, with the Hang Seng the worst performer down -1.15% as China reported the highest number of Covid cases since April. No major data ahead of Governor Lowe’s talk at the Annual Committee for Economic Development of Australia dinner in Melbourne next Tuesday evening.
USD
The AUDUSD opens down at 0.6693 as Fed Member Bullard indicated the minimum restrictive Fed policy rate would be 5% to 5.25%. He acknowledged October’s encouraging CPI figures, being +0.4% m/m (the lowest level since January 2022), but indicated any signs of disinflation are speculative at best. Wall St was slightly lower, with the S&P 500 trading -0.6%, the NASDAQ -0.5% & the Dow Jones down -0.2%. The Philly Fed Business Survey for November fell to -19.4, down from -8.7 and significantly worse than expectations of -6.0 as manufacturing activity continues to decline. Unemployment Claims came in at 222k, below the previous print of 226k & slightly better than expectations of 225k, showing widespread layoffs have remained low despite a surge in technology-sector job cuts that has raised fears of an imminent recession. Housing Starts for October fell 4.2% to 1.45m, below expectations of 1.53m due to significant positive revisions. No major data expected ahead of Existing Home Sales in the early hours of Saturday. Markets are currently expecting the figure to arrive at 4.41m, continuing the steady decline from 6.34m 12 months ago.
EUR
The AUDUSD opens down at 0.6454 after reaching 1-week lows of 0.6431 overnight. European equities were mixed on the close with the DAX up +0.2% and CAC falling -0.5%. Eurozone Final CPI y/y figures arrived at 10.6%, up from 9.9% in September yet short of expectations of 10.7%, while the Core figure was on-par at 5%. Little impact seen on markets here as the ECB continues to grapple with seemingly unwavering inflation. This evening, ECB President Lagarde is due to speak at the European Banking Congress in Frankfurt. Depending on the tone of her commentary, we may see some volatility.
GBP
The AUDGBP opens down at 0.5638 as the UK’s Chancellor Hunt hit the wires outlining the Autumn statement aimed at plugging the fiscal hole that led to the collapse of Gilts and sterling in September. As generally accepted, there were widespread tax increases while the energy bill cap was extended 12 months out from April 2023. It was confirmed that the UK was in a recession as inflation remains persistent & expected to increase before deflation in 2025. The budget has cemented views of the BOE continuing rate hikes into 2023. Looking ahead, Retail Sales m/m figures are expected to increase +0.5%, above last month’s contractionary figure -1.4%. GfK Consumer Confidence data is also expected at -46, with any figure above 0 indicating optimism. The expected figure follows the past year’s trendline of steadily declining sentiment, which isn’t surprising as the cost-of-living squeeze continues to bite.
NZD
The AUDNZD opens down at 2-week lows of 1.0907 despite a lack of data overnight. Credit Card Spending y/y data is due on Monday with no expectation posted. It’s a double-edged sword as increased figures may reflect either confidence in taking on more debt, or a stop-gap measure to meet short-term debt obligations.