AUD Stronger on Less Malign Labor Force Numbers

AUD

The AUD is stronger across the board barring the NZD, as the local dollar continues to grow in demand with risk sentiment improving, evident from the best performance by US Equities in 6-months. A solid start to earnings season pushed the S&P 500 and the NASDAQ up +1.6%, while the Dow Jones was +1.5% higher. Earlier yesterday Aussie Employment was mixed, but given the circumstances of restrictions and lockdowns, it could have been a much heavier outcome. The report showed that the number of employed people decreased by 138K in September, coming off the back of the previous month's decline of 146.3K. Though this was accompanied by only a modest uptick in the unemployment rate to 4.6% from 4.5% recorded in August (better than expectations of a more significant increase to 4.8%), as well as an improvement in monthly hours work which increased by 15 million hours. Surging commodities took a breather with Iron-Ore losing -2.3%, Copper saw +2.2% gains, and Gold just ticking ahead, up +0.1%. China released some inflation data yesterday but really failed to move markets, despite factory-gate prices rising at the fastest pace on record due to surging coal costs amid power crisis. China’s official producer price index (PPI) rose by +10.7% in September from a year earlier, compared with +9.5% in August. The consumer price index (CPI) rose by +0.7% in September from a year earlier, compared with a +0.8% rise in August. No local data to round out the week.

USD

The AUDUSD hitting 0.74 levels for the first time since early September in what has been a resounding week for the Aussie Dollar, currently trading at 0.7416. Some upbeat US data provided additional support to the market’s mood. US weekly Unemployment claims data was better than expected with initial claims falling from 329k to 293k and beating estimates of 320k, while continuing claims fell from 2.727m to 2.593m and beating estimates of 2.670m. Easing the mood was September’s US Producer Price Index which was up +0.5% MoM and 8.6% YoY, higher than the August readings although below the market’s expectations. Another factor weighing in on the Greenback were treasury yields holding at the lower end of its recent range, with the yield on the 10-year US Treasury note bottoming at 1.507%. Earlier bullish commentary from Fed Speakers this week were followed up by the Fed’s Barkin saying that inflation now looked broad based and hinted at a near term tapering of asset purchases, adding that it would soon become clearer as to when rate hikes would be appropriate. Later this evening will see US retail sales, with markets expecting a rebound amid diminishing COVID spread, though the figures may be offset due to continued weakness in autos and its concentration in goods.

EUR

The AUDEUR broke the 0.64 barrier for the first time since early July before jumping back to 0.6396 at time of writing. European markets ticked modestly higher into the close with the FTSE up +0.9% at the closing bell, while the CAC and DAX closed around +1.4% higher. During the European session, some ECB members crossed the wires. Klass Knot said that the inflation outlook for the Eurozone is back on track, and in the same tone, ECB President Christine Lagarde said that they continue to view the inflation upswing as being largely driven by temporary factors. That said, most ECB policymakers seem to adhere to the “transitory” narrative, contrarily to what Federal Reserve members have been vocal about recently. It’s been a quiet week on the European data front with most impetus taken from ECB speakers, the last European data of note this week will be some Italian and EU Trade Balance, though its not expected to entertain markets.

GBP

The AUDGBP also charging northbound to early-July levels, trading at 0.5424 this morning. BoE speaker Silvana Tenreyro tempered expectations saying that “Raising interest rates to counter higher semi-conductor or energy prices would be 'self-defeating', if one-off, noting that we are also seeing temporary supply disruption from post-covid imbalances worldwide. This follows the narrative seen in aforementioned ECB speakers that inflation should be temporary in the Eurozone. We’ll see if this line of thinking will change when the Britts release their inflation data including the headline CPI next week.

NZD

The AUDNZD was the only major that was worse off into the morning, as it trades at 1.0547 at time of writing. Released early this morning, New Zealand's manufacturing sector saw an overall return to expansion for September, according to the latest BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for September was 51.4 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).  This was 11.7 points higher than August, but still someway off levels of expansion typically seen pre-lockdown. This was the only notable piece of data out of New Zealand for the last couple days with direction largely coming from the market's risk sentiment, health conditions, and commodities. Quarterly CPI data will be the next key release on Monday, though the data will only account for the time period prior to their recent interest rate hikes.