FOMC and RBNZ Move in Different Directions
AUD
The Aussie Dollar travelling higher against the majors this morning, the only exception being the NZD, as some less hawkish language from the US’s FOMC spurred on Equity markets and in turn the AUD. Asian equities were higher on Wednesday’s close with the Nikkei and Hang Seng +0.6%. The ASX was the best performer finishing the session +0.7%, with gains from the resources sectors lifting the share market to near 6-month high. In local data, Australian Flash Manufacturing and Services PMI’s were largely ignored as it came in at 51.5 and 47.2, little change from past readings. Elsewhere in Asia, there is still little hope for Chinese covid-protocols easing as Beijing is said to be maintaining Covid curbs until a turning point appears, and asked residents to not leave the city until necessary. Direction will come from elsewhere for the remainder of this week, with no more data from Australia until the next week.
USD
The AUD/USD had a bumper overnight session picking up over 1 cent to trade at 0.6733 this morning. The move was mainly driven by the FOMC Meeting Minutes from early November, which showed policymakers favoured a slowing of interest rate increases as "a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate." US stock markets raced upwards before settling to take gains of +0.3% on the Dow Jones, +0.5% S&P 500, and +1.0% on the Nasdaq. In earlier data from the US, Durable Goods Orders for October rose by 1.0% MoM to beat estimates of 0.4%, Weekly Unemployment claims came in at 240k vs 225k expected. Other data on the docket for the US was the November Manufacturing PMI which fell to 47.6, down from 50.4 and below expectations of 50.0. Services PMI fell to 46.1, down from 47.8 and below expectations of 48.0. The softer data weakened market mood but did not falter the Greenback to the same degree as the meek Meeting Minutes. A potentially quieter few days ahead as we approach the extended US Thanksgiving break.
EUR
The AUD/EUR picked up some minor gains as action from the US had some carry-on effect to the other majors, now trading at 0.6469. European Equity markets were largely flat as the FOMC news came after the European close, the DAX unchanged whilst the CAC was up +0.3%. Eurozone November Consumer Confidence index was -23.9 coming in better than expectations of -26. Finally, Eurozone Manufacturing was 47.3 (46 expected) and Services was 48.6 (48). German Manufacturing PMI was 45 (46.7) and Services was 46.4 (46.2). Little reaction to the PMI’s with no outlying data to surprise markets. Looking forward, the ECB publishes their account of their October Interest Rate Policy Meeting. There will be attention on the size of future interest rate hikes and if these will be impacted by the size of TLTRO repayments. Markets will also look for any hints of a Quantitative Tightening timeline.
GBP
The AUD/GBP moving largely sideways to sit at 0.5581 currently with a relatively quiet macroeconomic calendar in comparison to previous weeks. In the UK, the Manufacturing PMI was posted at 46.2, slightly better than forecasts of 45.8. Services were unchanged at 48.8, better than the anticipated drop to 48. No datapoints worth discussing for the remainder of the week, though there will be some MPC members crossing the wires tonight.
NZD
The AUD/NZD has fallen to new lows not seen since late March 2022, off the back of another aggressive rate hike from the RBNZ, sitting at 1.0784 currently. New Zealand’s central bank raised interest rates by a record 75 basis points to bring the Official Cash rate up from 3.5% to 4.25%, and signalled further tightening ahead, stepping up its inflation fight even as it forecasts a recession next year. Yesterday’s hike is the biggest since the RBNZ introduced the OCR in 1999 and takes the benchmark to its highest level since 2008. The policy committee considered raising the rate by as much as 100 basis points today, its record of meeting showed. The central bank is responding to stronger-than-expected inflation and near-record low unemployment, which support the case for it to accelerate the pace of tightening after five straight 50-point hikes. Quarterly Retail Sales will round up the week from New Zealand tomorrow.