AUD Firm as NSW Reopens for Business

AUD

The AUD was marginally lower against most majors despite gains in Asian Equity markets and Commodities. Nikkei and CSI were up +1.3% on Friday, as China’s service sector represented by the Caixin Services PMI returned to growth in September, moving from the contractionary previous level of 49.3 to the expansionary 53.4. The ASX rose +0.9% with the energy sector driving the gains. Commodities were led by Iron Ore as it put on +2.1%, Copper seeing an increase of +0.8%, whilst Gold edging ahead, up by +0.1%. The housing and jobs sector is of keen importance to the RBA, insisting that it would rely on macro-prudential measures to cool the housing market rather than rate hikes.  At last week’s meeting, the RBA affirmed its commitment to keep rates steady until at least 2024, with that being said, Thursdays employment data will be closely eyed and the highlight of this weeks data calendar. Though lockdowns are likely to extend for Victoria as they continue to topple records, NSW has eased restrictions beginning today as its now fine to head to the pub in a (responsible) manner.

USD

The AUDUSD a touch softer if not even over the weekend as it trades at 0.7311 at time of writing, largely ignoring some poor jobs data. The monthly report published on Friday by the US Bureau of Labor Statistics revealed that Nonfarm Payrolls (NFP) rose by 194,000 in September. This print missed analysts' estimate for an increase of 500,000 by a wide margin. On a positive note for the USD, the Unemployment Rate declined to 4.8% from 5.2% and August's NFP print got revised higher to 366,000 from 325,000. What is dragging the Greenback higher at the moment are 10-year US Treasury yields, which reached the highest level since June after advancing 2bp to just shy of 1.60%. As the US kicks off the week with a bank holiday today, the main event of the week will be Wednesday's minutes of the September FOMC meeting that should likely shed more light on the tapering debate and strategy.

EUR

The AUDEUR is off the mark trading lower, sitting at 0.6314 this morning. European Equity markets were mixed with the FTSE gaining +0.3% though the DAX lost the same amount and the CAC closed -0.6% lower. European Central Bank policymaker Pierre Wunsch said on Friday that he is expecting inflation in the euro area to be higher than their latest forecast, and regarding the policy outlook, Wunsch said that it will be a difficult exit from the monetary support and added that he is in favour of staying patient. This falls in line with Christine Lagarde’s comments which distanced the European Central Bank’s move towards tighter monetary policy, separating from other central banks, promising not to “overreact to transitory supply shocks” driving inflation higher. Tonight will see the release of Italian Industrial Production but it shouldn’t turn markets heads.

GBP

The AUDGBP trading just lower to sit at 0.5364 this morning. The BoE’s Michael Saunders, one of the Bank’s nine rate-setters has warned households to get ready for “significantly earlier” interest rate rises as inflation pressures mount, and said investors were right to bet on faster increases in borrowing costs with consumer price inflation on course to rise above 4%. “Specifically in the UK, with the lack of truck drivers, logistic costs also increased substantially, and there’s a shortage of labour in certain areas of the economy. His comments didn’t move markets but are worth noting ahead of inflation data this month.

NZD

The AUDNZD managed to jump slightly higher to trade at 1.0556. The worsening COVID-19 conditions in New Zealand (NZ) seems to be the key catalyst behind the latest weakness, highlighting today’s speech from Prime Minister (PM) Jacinda Ardern as an important factor for Kiwi Dollar.NZ covid infections jump to a six-week high of 60 during this weekend, per the latest government update. Although more than 40 of them were linked to the previous infections, with more than 350 exposure cites announced, pessimism concerning the covid-led hardships are weighing on the New Zealand economic recovery.