AUD Lower on Weaker Commodities and Inflation Concerns
AUD
The Aussie traded lower against the majority of its peers as risk sentiment across Asia took a turn for the worst. Equities were down across the board including losses of 0.7% for the ASX and markets were disappointed that nothing constructive was derived from the recent Biden-Ping virtual conference. Adding to the sour mood is the ongoing Evergrande solvency crisis in China, as well as a day of red across the commodities sector, Iron Ore and Crude Oil taking the worst of the heat. Economic data releases in the Asian sessions are very light on the ground into week's end, Monday's local Services and Manufacturing PMIs the next release of note. AUD to be at the mercy of commodities and risk sentiment over coming days. The recent dovish stance of the RBA appears to still have some residual affects which will likely continue to undermine the AUD.
USD
The AUDUSD has continued its downward trend towards 72c, falling to 6-week lows and currently sitting at 0.7265. The USD is benefitting from strong safe-haven flows and an anticipation from market participants that USD yields will move higher faster than other currencies. This is illustrated by the strong DXY which is currently near 4-month highs at 95.92. To last night's data, and US Housing Starts data for October declined by 0.7% over last month to 1.520 million while Building Permits rose by 4.0% to 1.650 million. US Equities followed suit with both the Dow Jones and S&P 500 closing lower. There's not a lot in the way of economic data tonight; more Fed speak will be accompanied by Unemployment Claims which have been steadily retreating all year. Exporters are watching excitedly to see where this current run of USD strength will lead to, Sept lows of 0.7173 are within sight.
EUR
The AUDEUR continued slowly lower in the last 24hrs in what was lacklustre trade, opening at 0.6419 this morning. Notably the EURUSD has dropped to 4-month lows which has had some overflow adverse effects for EUR against other currencies. The ECB’s Rehn and Lagarde were both on the wires overnight, with Rehn outlining that inflation is accelerating on the energy supply crunch. Further outlining that persistent high inflation could weigh on economic recovery in Europe. Markets reacted negatively to the commentary with European equities dipping into the close with the FTSE closing at 0.5% lower and the DAX closing flat. In what appears to be a common theme, there is a distinct lack of economic data leading into the end of the week, however ECB President Lagarde is back at it tomorrow tonight.
GBP
The AUDGBP continues to trade lower and currently sits at 0.5381, a far cry from the 6-month highs of 0.5515 at the beginning of the month. A steady stream of encouraging data from the UK is the driver of the GBP resurgence, continuing overnight with UK CPI rising to 4.2%, the highest 12-month inflation rate since 2011, October PPI was 13.0% (12.1% expected) up from 11.9% a month earlier, and the highest rate since 2008. These large jumps in Inflation are the reason why the BoE seems to be on the verge of its first post-Covid interest rate hike. No data on the ticket for tonight.
NZD
AUDNZD is also down to the tune of roughly 0.5%, having given up the 1.04 handle it trades this morning at 1.0376. Yesterday's Kiwi PPI output data was encouraging, printing at 1.8% (expected 1.4%). Quarterly inflation expectations are set to be released today which will be one last consideration for the RBNZ which is all but certain to raise NZ interest rates at their meeting on Wednesday next week. Market have priced in 132% chance of a 25 basis point hike.