AUD Creeps Higher With Quiet Data Calendar
AUD
The AUD is higher across the board to varying degrees, even with very little major economic data to swing currency markets. Asian equities were generally stronger on the close, the Shanghai Composite Index gained +0.76%, and the ASX finishing the Monday session +0.3% higher following a rebound in commodity prices. Nikkei was the underperformer down -0.70%. As mentioned, Commodity currencies saw the benefit of Iron Ore rising +2.2%, though Gold was flat on the day after surging to above the $1800 mark on Friday. Local interest remains firmly fixed on tomorrow’s inflation data particularly given the backdrop of rising yields and the strong inflation data from cross-Tasman neighbours. Although the RBA has embraced a ‘lower for longer’ policy – keeping QE going until February 2022, pressure may build for a reduction in stimulus if headline Australia inflation stays above the RBA’s target range. Definitely one to keep an eye out for tomorrow.
USD
The AUDUSD is edging further north and looking to break through the 0.75 mark again after reaching multi-month highs late last week, trading at 0.7491 at time of writing. US Equities were all stronger as earnings reporting season is in full swing, with the S&P 500 +0.5% higher whilst the NASDAQ gaining +1.0% really gave financial markets some added confidence as risk sentiment improved overnight. The Chicago Fed National Activity Index for September, which fell to -0.13, down from a negatively revised +0.05 and below expectations of 0.20, whilst the Dallas Fed Manufacturing Activity Index rose from 4.6 to 14.6 in October, beating expectations of 6.0. Neither piece of data was influential enough to move currency markets, with a heavier back-end to the US Economic Data calendar more likely to be on the minds of markets. Early tomorrow morning will see the release of the CB’s Consumer Confidence and Richmond Manufacturing Index to kick things off.
EUR
The AUDEUR was the highlight of the majors with it being the strongest of the bunch, up to 0.6449 this morning. German business morale fell for the fourth month running in October as supply bottlenecks held back factory output in Europe's largest economy, the German IFO Business Climate survey showed on Monday. The Ifo institute said its business climate index fell to 97.7 from an upwardly revised 98.9 in September. The reading was the lowest since April and undershot the expectations figure of 97.9. Adding to the poor sentiment in Europe, Germany's Bundesbank said that the full-year growth in 2021 is likely to be significantly below the June forecast of 3.7% due to a slowdown in activity in the fourth quarter. Bundesbank further noted that the momentum in the service sector is expected to slow considerably and added that industrial supply chain issues are forecast to persist.
GBP
The AUDGDP continuing to slowly climb higher as it moved to 0.5437 at time of writing. With little in terms of data out of the UK yesterday and today, currency markets are weighing up expectations about a potential rate hike from the Bank of England at its next meeting at the start of November. This is despite mixed data from the UK last week which has resulted in traders dialling back rate hike expectations so soon. For instance, business activity surveys showed improvement as the economy unexpectedly regained momentum in October, but Retail Sales figures were worse than expected which has made it a guessing game for when Policymakers will move the benchmark interest rate.
NZD
The AUDNZD is trading marginally stronger but still presiding within the comforts of the 1.04 levels, trading at 1.0457 this morning. Nothing new out of the Kiwis with a sleepy to start for the New Zealanders and it looks to continue for the rest of the week with the only piece of data of note being the ANZ Business Confidence Report on Wednesday. Direction likely to be taken from Aussie Inflation data tomorrow, Commodities, as well as overall risk sentiment in markets.