AUD Under Fire as Risk Aversion Grows
The AUD opening this week lower against most major currencies, with the comments from Governor Philip Lowe earlier in the month which indicate a first interest rate hike somewhere in 2023 still casting a dovish shadow over the Australian market. In comparison to hawkish sentiment from most other central banks around the world including US and UK, the Aussie dollar has found itself under the pump and at monthly lows. No major news over the weekend however Commodities were also unsupportive or AUD, Gold down 0.8% and Silver down 1.1%. Asian equities finished the week in the green, with ASX up as well as Shanghai Comp and Nikkei, however unable to support the beleaguered AUD. There is no data on the docket for today, however at 9am tomorrow morning the week kicks off with Manufacturing and Services PMIs, markets looking for any inflationary green shoots which could affect the RBA's monetary policy adjustments.
USD
AUDUSD at its lowest since early October, trading at 0.7231 this morning. A string of recent positive data releases out of the US and bullish Fed commentary over the weekend spurring on hawkish US sentiment, with the DXY now the strongest it's been in 4 months. Fed Member Waller in NY on Saturday saying that the labour market was “rapidly approaching” full employment and higher inflation could lead to a faster taper. Vice-Chair Clarida late adding to the hawkish commentary by saying that the pace of tapering assets may need to be discussed at the next Fed meeting and that Q4 growth was likely to be very strong. By contrast, the RBA’s dovish statements recently throwing a wet blanket over ideas of early local rate increases has led to the AUDUSD currency pair suffering heavily. US Equities were mixed with the Dow down 0.7%, S&P 500 down 0.1% and the NASDAQ up 0.4%. It will be a busy week ahead for the economic data, kicking off tomorrow night with Flash Manufacturing and Services PMIs, and then a steady flow with GDP and FOMC Meeting Minutes the most notable releases.
EUR
AUDEUR sitting somewhat steady as the uncertainty in the Eurozone and overall dovish atmosphere sees itself matched by an equally dovish Aussie market, opening at 0.6402 this morning. Over the weekend ECB's Lagarde reconfirmed at the Frankfurt European Banking congress that interest rate hikes were unlikely in Europe anytime in 2022. European equity markets reflected the downbeat assessment from the ECB, losing some ground and closing in the red with the FTSE, CAC and DAX all down around 0.4%. News then coming out of Europe that Austria would announce a nationwide lockdown and mandatory vaccinations as COVID cases surges across the continent. The German Health Minister on the wires and not ruling out a similar measure while Hungary reported the highest case numbers on record since the pandemic began. To the data, and we'll receive EZ Consumer Confidence tonight, however tomorrow's Flash Manufacturing and Services PMIs are set to be the highlight for the European week.
GBP
AUDGBP reaching a monthly low, opening at 0.5377 this morning having given up about 2% in the last week alone. UK economic data supporting GBP against commodity currencies like the AUD, as hopes of imminent BOE rate hike adds are revived. On Friday UK Retail Sales for October came out better than expected, showing an increase of 0.8% against forecasted increase of 0.5% and a previous result from September of 0.0%. To the week ahead, and tomorrow night's Manufacturing and Services PMIs are the first hurdle for AUDGBP, followed by BoE Gov Bailey on the wires towards the end of the week.
NZD
AUDNZD pair down over the weekend, being punished by speculation of further cash rate hikes coming out of the RBNZ, opening at 1.0320 this morning. Increasing NZ Inflation and stronger unemployment reports have lead to markets all-but-certain of a further 25 basis point rate hike by the RBNZ on Wednesday. The Kiwi likely to remain well supported short of a shock decision to leave rates on hold on Wednesday.