AUD Reclaims Lost Ground on Risk Reversal

AUD

The AUD spent the last day recovering some of the recently lost ground across most major currency pairs, as risk appetite improved across markets. Asian Equities were mixed on Thursday with Shanghai Comp up 0.9% while the Nikkei posted a loss of -0.3%. The ASX jumped 135 points (or 1.9%) and closed at 7,332. This was its biggest daily percentage gain since November 2020. Commodities were relatively subdued with both Gold and Iron Ore having made no movement, while Silver was up 1%. Yesterday, China’s NBS Manufacturing PMI dropped to 49.6 versus 50.1 forecast for August (a number sub-50 indicates a contraction). On the contrary, Non-Manufacturing PMI rose to 53.2, increasing from the prior 47.5 and exceeding expectations of 52.7. No reaction to the news which showed clearly the growing issues being faced in the Chinese manufacturing sector. The slowing Chinese economy is threatening to become a significant theme in currency markets, exacerbated by the ongoing China Evergrande fiasco. It’s a quiet day ahead on the domestic calendar front before some key releases tonight in the US (See below). China also starts a 5 day bank holiday today in observance of National Day.

USD

The AUDUSD pair gained momentum to recapture the 0.72 handle amid a more risk inclined market mood, trading at a rate of 0.7228 at the time of writing. US Equities has mixed results with the Nasdaq finishing -0.4 lower, while the S&P 500 fell -1.2% and the Dow Jones down a significant -1.6%. Oil climbed after a two-day slump, heading for a monthly gain amid tighter supplies. Brent was up 0.6% to $79.10 a barrel. The yield on US 10-year Treasuries was little changed at 1.52%. In early data, US Q2 GDP was revised up from 6.6% to 6.7% QoQ with Personal Consumption revised up to 12.0% from 11.9%. Core PCE was unchanged at 6.1% as expected. Also released and weekly jobless claims were a little weaker than expected with initial claims rising to 362k from 351k and coming in weaker than forecasts of 330k while continuing claims fell slightly to 2.802Mio though this was a little above forecast of 2.790Mio. Little reaction to the data. There are some key releases on the docket tonight with US ISM Manufacturing for September & Core PCE price index being of note.

EUR

The AUDEUR pair was resurgent and made a gain overnight, trading at a rate of 0.6245 at the time of writing. European Equities were down across the board with the DAX posting a loss of -0.7% and the CAC was down -0.6%. To the data, in Germany, the Unemployment change was -30k, marginally beating expectations of -37k with the jobless rate steady at 5.5%. Italian Unemployment was unchanged at 9.3%, higher than expectations of 9.2%. Eurozone Unemployment was 7.5%, an improvement from a previous 7.6%. There’s a flurry of European Data on the docket this evening with Eurozone PMIs and CPI being the key mentions, the update to the EU Consumer Inflation (CPI) may put pressure on the ECB to adjust the forward guidance for monetary policy as the headline reading for inflation is anticipated to increase for the third consecutive month, while the core CPI is expected to widen to 1.9% from 1.6% per annum in August.

GBP

The AUDGBP pair followed suit to make a gain overnight, trading at a rate of 0.5363 this morning. The London Benchmark FTSE 100 ended the day lower, down 21 points (0.3%). In early data, it was reported that Britain’s economy grew by more than previously thought in the April-June period, official data showed on Thursday, before what looks like a sharp slowdown more recently as bottlenecks in the economy, including a shortage of truck drivers, mount. GDP increased by 5.5% in the second quarter, compared with a preliminary estimate of growth of 4.8%. The figures provided a more complete picture of Britain’s swift bounce back from the coronavirus-led lockdowns, but there are signs of a loss of momentum more recently due to the post pandemic shortage of staff and supplies. Little in the way of data, the UK’s Manufacturing PMIs being the only key data of note.

NZD

The AUDZND pair is trading higher this morning amid a reversal in risk sentiment, trading at a rate of 1.04751 at the time of writing. Despite the lockdown in Auckland, new dwelling consents surged in August, the seasonally adjusted number of new dwellings consented rose 3.8 percent, after rising 2.2 percent in July 2021. On Thursday, the NZ ANZ Business Confidence rose to -7.2 in September, up from August’s -14.5 although still negative. There is no noteworthy local data on the docket headed into the weekend, but things will spice up on Wednesday next week when the RBNZ is back in action with their next monetary policy decision.