Chinese Prints Lowest GDP on Record

AUD

It’s been a lackadaisical start to the week for currency markets with little data to offer inspiration for the AUD as it trades just below levels seen yesterday morning. With a light macroeconomic calendar, currencies are relying mainly on market sentiment for direction, as seen yesterday with weaker than expected Chinese GDP data weighing in on Asian Equities. China released their Q3 GDP, with their economy experiencing the worst quarterly growth on record, expanding to 4.9% on YoY basis, below the market expectations of 5.2%. Asian Equities were largely lower off the back of it, with the Nikkei and CSI down -1.15%, though the ASX managed to outperform and climb by +0.3% to the highest level in 3 weeks. Commodities were slightly off the ball with Iron Ore losing -1.0% and Gold a touch lower, losing -0.1%. Headlining the day domestically will be the release of the Monetary Policy Meeting Minutes from its meeting on October 5. Although we are unlikely to learn anything new, markets will look for any colour in the Board’s discussion of macroprudential measures.

USD

The AUDUSD cooling off overnight though still holding onto the 0.74 handle as it trades at 0.7410 this morning. Wall Street was mixed with the NASDAQ up +0.7%, the S&P 500 +0.2%, while the Dow Jones finished down by -0.2%. US yields continued to tick higher driven by rising inflation expectations while oil took a breather from its recent run and was flat on the day. Inflation pressure was exemplified with Industrial Production in the United States declining by -1.3% on a monthly basis in September, data published by the US Federal Reserve revealed on Monday. This reading followed August's expansion of +0.4% and came in worse than the market expectation for an increase of +0.2%. The contractionary struggles were highlighted by the production of motor vehicles and parts falling -7.2%, as shortages of semiconductors continued to hobble operations, while factory output elsewhere declined -0.3%. With some less notable data on the calendar today, markets will look to see if FOMC Speakers Waller and Bowman (not to be mistaken for the horse racing personas) offer any further hawkish commentary when they speak later tonight. 

EUR

The AUDEUR resuming its position a fraction below its recent highs as it trades at 0.6381. European Equity markets were all softer into the close, with the FTSE down -0.4%, the DAX -0.7% and the CAC -0.8%. The global increase in inflation keeps adding negative pressure in the euro which has been one of the worst G10 performances over the last weeks. The surging energy prices have pushed consumer inflation to 13-year highs in the Euro Area and are threatening to derail the post-pandemic recovery. The inflationary pressure doesn’t seem like it will stop soon with Russia keeping a tight grip on Europe’s energy market, opting against sending more natural gas to the continent even after President Vladimir Putin said he was prepared to boost supplies. This will likely remain the main influencer on EUR movement with little data of note until PMIs at the end of the week.

GBP

The AUDGBP is back on the same footing as it was yesterday, even with an earlier dip as it trades at 0.5397 this morning. Over the weekend, Bank of England (BoE) Governor Andrew Bailey said that while the central banks don’t have the tools to counter supply disruptions, officials need to prevent higher inflations expectations from becoming permanent. Furthermore, Bailey added that rising energy prices mean inflation will last longer than expected, noting that there will have to be some form action at a Monetary Policy meeting. We’ll hear more commentary from Gov Bailey tonight, with the rhetoric about inflationary pressures likely to continue. 

NZD

The AUDNZD was the worst off of the major pairs, with it currently trading at 1.0459 at time of writing. The reason for the fall-off was the better-than-expected CPI report out of the Kiwis, with CPI rising by +2.2% in the third quarter, beating expectations and surging at the fastest pace in over a decade driven by housing-related costs and other supply constraints. This could give indication of further tightening of macro-policy in months to come. Though the Kiwi gains could have been limited as the policymakers are considering tightening restrictions in Auckland again due to rising coronavirus infections.