AUD Volatile on Questions Over China's Zero-Covid Stance
AUD
Aussie dollar had a significant lift over the weekend, supported by strong commodity prices and building anticipation from investors that the US Fed Reserve will be forced by a significant economic contraction to capitulate and pivot from their hawkish monetary policy. Asian equities were firmer in Friday trade as investors embraced signs that authorities were working to ease the impact of China’s Covid-zero policies. Hang Seng up 5.3% and China’s CSI 300 +3.27%. Australian stocks less buoyant although the ASX200 managing 0.5% gains. This may reverse later today after headlines from China early this morning that China would "unswervingly" stick to their zero Covid approach. Super strong performance on the commodity front with Gold up 3.2%, Silver up 7.2% and Iron Ore up 1.6%. Australia had Retail Sales data which came out as expected of 0.6% as well as a monetary policy statement. Looking ahead today we have ANZ job advertisements as well as Trade Balance to be released from China today, Macquarie Strategy expect export growth to trend down further as global demand recedes. Meanwhile, import growth would remain subdued as tighter zero-Covid policy and the ongoing property woes took a heavy toll on domestic demand.
USD
AUDUSD is up heavily since Friday buoyed by improved risk sentiment and mixed US data, trading as high as 0.6482 on Saturday, but opening lower at 0.6421 this morning, which is still over 2% higher than Friday's open. Enjoying the upbeat mood, Wall St remained firm into the close with the NASDAQ +1.3%, the S&P 500 +1.4% and the Dow Jones +1.3%. Non-farm employment data was mixed on Friday. The US Unemployment Rate was slightly worse at 3.7% from a 3.6% expected. Employment change soared into the green at 261k from a 197k expected, and average hourly earnings was 0.1% in the green, from a 0.3% expected. Looking ahead into the day ahead there is no data coming out from the US, with a light domestic calendar, the focus this week will be the release of the US CPI for October on Thursday. Macquarie Strategy expect the core measure to show a modest deceleration from September.
EUR
AUDEUR opened higher at 0.6490 this morning but is dropping fast this morning as news that China will maintain a Covid-zero stance, trading at 0.6455 at time of writing. European equities closed Friday’s session higher across the board with 2.5% gains. Friday's European data included a string on Services PMI data, all of it above expectations with the exception of Italy. ECB President Lagarde delivered a speech on Friday night during which she stated "we must not, and will not, let high inflation become entrenched". Recent data showed headline inflation in the currency bloc accelerated to a fresh record of 10.7% in October, well above the bank's target of 2%, driven by energy and food prices; while the region's GDP growth slowed sharply to 0.2% in the July-September period, the weakest pace in six quarters. Looking ahead throughout the week we have a string of lower tier data coming out the Eurozone.
GBP
AUDGBP is up to the tune of ~1% since Friday's open, sitting at 0.5675 this morning. FTSE100 was 0.8% higher on Friday's close as were most equity markets. On Friday BOE Chief Economist Huw Pill commenting that “it’s a challenge to set monetary policy such that economic slowdown is sufficient to ensure inflation is consistent with target and we also avoid overshoot in the other direction”. He went on to comment that he doesn’t think rates need to rise as much as “markets are pricing”. Friday's data had construction PMI data which came out at 53.2 from a 50.2 expected. Today we have Halifax HPI m/m data expected at -.4% before Friday's important GDP figures which markets expect to show a 0.4% contract for September.
NZD
AUDNZD is up sitting at 1.0918, up slightly from Friday. No data came out of New Zealand on Friday and the week ahead is also rather bare with the exception of Inflation Expectations due tomorrow which may give a slight indication into the Bank of New Zealand's next rate hike decision.