AUD Hanging On in Risk Averse Markets
AUD
With increasing concerns around the emergence of the Omicron variant of the Covid virus, the AUD is struggling to hold its own against all major pairs. Asian equities performed poorly, with the Nikkei being hit the hardest falling 1.6% after government shut the borders. The ASX fell 0.5%, driven by weak real estate and energy stocks. The saving grace for AUD may have been iron ore and copper both holding firm despite current conditions. Commodities were mixed, with natural gas remaining solid amongst current market conditions, being up 5.7%, oil up 1.3%. Gold and silver both taking minor losses down -0.1% each. Iron ore and copper both performed strong, with iron ore up 0.7%, and copper at 1.2% in the green. A number of low impact data releases are due out in Australia before midday, including Building Approvals which measures future construction activity and permits and can impact on jobs. Current Account Balance data will also be released, which measures the net flow of transactions including goods, services, and interest payments into and out of Australia. A surplus or deficit will prove hawkish or dovish for markets, respectively. Tomorrow's GDP data for Q3 will be the local highlight of the week, of course AUD will be susceptible to further Omicron escalations as well.
USD
AUDUSD trades at 0.7133 this morning, not far from its 2021 low of 0.7106. The Omicron variant has only slightly impacted US Federal Reserve tightening expectations so far, with the first rate hike now expected in Q1 2022. More likely to be affected is consumer confidence which has been known to impact the US Dollar at times of despair. Global equity markets moved higher from yesterday's lows, with NASDAQ showing the largest gains of 2.0%. Also up were US yields, with the US ten year yield up 3.31% which is adding to USD strength. There is a raft of USD data due for release tonight, with Consumer Confidence numbers and Fed Chair Powell being the most notable mentions. Of course, Omicron developments are lurking not far from traders' minds.
EUR
After yesterday's minor recovery, AUD has traded sideways against EUR, opening only at 0.6323 this morning. In line with other stock markets, European stock markets closed higher after what was their greatest losses in a year on Friday. To last night's data, and Spain’s inflation rate hit 30 year highs, increasing to 5.6% in November. Italian producer price index YoY for October is 25.3% over an expected 15.6%. Eurozone consumer confidence is down from previous 118.6, coming in at 117.5. Tonight sees the release of Eurozone CPI data with increases expected in inflation.
GBP
AUDGBP has slowly been paring losses from the end of last week, opening at 0.5363 this morning. UK stocks traded slightly higher with FTSE up 0.9%, however Mortgage Approval and Individual Credit data was worse than expectations. Regarding the evolving Omicron situation, yesterday the junior UK health minister Edward Argar said that they don't expect rules to be tightened further in the next three weeks. Looking ahead and it's a quiet week of data from the UK, the BoE’s governor Bailey will speak on Wednesday evening in what will be the main event.
NZD
In what is a common theme this morning, AUD spent yesterday recovering slightly from Saturday morning's Omicron driven lows, opening this morning at 1.0465. ANZ will release data at 11am this morning regarding business confidence and outlook. No specific guidance from the NZ government yet regarding Omicron developments, stay tuned.