As Risk Grips Markets, Commodities Help AUD Hold On

AUD

The Aussie dollar had mixed results across the board against its trading peers as risk and uncertainty around Omicron re-entered markets. Asian equities were largely in the red on Friday with the Nikkei and CSI falling by more than 1.5%. The ASX however outperformed its’ peers, finishing the session 0.1% higher, with gold miners posting the largest gains, after the price of gold rose 1% to $US1795.35 an ounce. Other minerals were mixed with Copper and Iron Ore closing down 0.4% and up 1.7% respectively, helping to minimise the damage as investors fled to the safe haven USD. In local data there was nothing of note over the weekend as expected after the slew of data released last week. The minutes of the December RBA Board meeting are due today and may provide more detail on the options the Board discussed with respect to the future of the Bank’s bond purchase program. Despite an overall quiet week China is expected to release loan prime rates and their monthly CB Leading Index on Thursday.

USD

AUDUSD lost most of its gains from last week, falling steadily to 0.7125 this morning as the USD attracted bids from rising Omicron uncertainty. Aside from a speech from FOMC member Waller, there was no important data coming out of the US over the weekend. US equities finished last week on a soft note with the Dow Jones closing -1.5%, the S&P -1% while the NASDAQ fared a little better and finished Friday at -0.1%. Risk aversion was prominent feature on Wall St where the VIX rallied to be up more than 10% on the day. Fed’s Waller said that he supported the decision to accelerate tapering to give the Fed greater flexibility. He noted that Omicron was a considerable uncertainty though stressed that the US was close to full employment and that inflation was alarmingly high, persistent and broad based. He added that the March FOMC meeting was live and predicted 3 rate hikes in 2022. Looking ahead and we have a quiet week in the lead up to Xmas, Thursday will reveal final US quarterly GDP figures but the pair is likely to continue to follow risk sentiment in the interim.

EUR

AUDEUR has regained most of its losses suffered over the weekend having dipped as low as 0.6314 and opens just higher than Friday's levels at 0.6343 today. In early data on Friday, German November PPI MoM came in at 0.8%, lower than expectations of 1.4%, YoY was 19.2% (20.0% expected). German IFO December Business Confidence index came out at 94.7, missing expectations of 95.3. Furthermore, Euro November CPI matched the flash estimate of 4.9%, the highest since the euro was created. Additionally, ECB’s Muller said the ECB is ready to tighten faster if inflation stays above 2%. European equity markets were little changed into the close with the DAX closing down 0.7% & the CAC underperformed on the day with losses of 1.1% at the closing bell. Looking ahead, and tonight we have the German GfK Consumer Climate which surveys consumer sentiment on economic conditions may provide guidance for trading this week.

GBP

AUDGBP traded in tighter ranges over the weekend, finding itself at 0.5384 this morning. In the UK, November retail sales jumped 1.4% which beat expectations of 0.8% and putting YoY retail sales 4.7% higher than a year earlier. The FTSE showed little movement and closed down 0.1% on Friday. There is little in the way of economic data save public sector borrowing figures released tomorrow and Final Quarterly GDP figures on Wednesday which will may provide guidance to the pair through the week.

NZD

AUDNZD is trading at 1.0570 this morning only slightly higher than Friday and still unable to break into the 1.06s. The Final ANZ Business Confidence report on Friday was much more pessimistic than last months, scoring -23.2, a marked decrease from -18.1 in November. This survey is a leading indicator of economic and changes in business sentiment can be an early signal of future economic activity such as spending, hiring, and investment. The Trade Balance figures printed this morning however were much more positive where the difference in value between imported and exported goods during the reported month was -864M; beating expectations of -1.86B. This a significant improvement on the trade deficit of the Kiwi and could keep the AUD in check.