AUD Riding The Risk Sentiment See-Saw
AUD
The Aussie Dollar has benefitted overnight from an improvement in Omicron-related risk sentiment, with hopes that the Omicron outbreak will prove less severe on economic activity than initially feared. UK government scientists are reportedly set to conclude that those who become sick with the Omicron variant are less likely to become severely ill than from the Delta strain, as omicron might be intrinsically milder. Asian equities were mixed yesterday, with the ASX increasing 0.1%, the Shanghai Comp lost out by 0.1%, and the Nikkei gained 0.2%, however Asian equities are likely to follow their global counterparts' lead higher today on the improved sentiment. Gold and silver both rallied strongly in the last 24 hours, with gold gaining 0.8%, and silver gaining an impressive 1.3%, further supporting the AUD. With the data calendar looking very thin indeed, AUD movements will be dominated by the see-sawing Omicron developments.
USD
USD was in reverse last night, AUD capitalising on the improved risk sentiment and topping out near monthly highs of 0.7221 before opening slightly off at 0.7213 this morning. Dragged higher by the improved risk sentiment, US equities were on the up, the Dow Jones increased by 0.5%, the S&P 0.6%, and the NASDAQ gaining 0.8%. US 2 year bond yields increased by 0.67%, and 10 year yields increased by 1.46%. US data overnight was mixed with Q3 GDP revised up to 2.3% from an earlier reading of 2.1% while Core PCE was revised up to 4.6% from 4.5% and Personal Consumption was revised up to 2.0% from 1.7%. However in later data, existing home sales dropped from forecasts of $6.55m to $6.46m. On the horizon, US Core PCE Price Index month on month is to be released tomorrow at 12:30am. Looking ahead and tonight we have Core PCE Price Index and Durable Goods Orders, however markets are paying closer attention to risk in the lead up to Xmas.
EUR
The AUDEUR traded in a 1% range over the last day, opening higher this morning at 0.6360. European equities opened marginally higher with the DAX and Euro Stoxx both 0.3% higher on the improved risk sentiment. ECB’s Lagarde said that the outlook for growth looked strong but energy prices remained a headwind. She noted that the ECB was “not quite there” in terms of meeting the inflation goal and that prices would fall over 2022 with inflation to settle under 2% in 2023 and 2024. A quiet day of data ahead, with German Import Prices being released at 6pm.
GBP
AUDGBP traded in very similar fashion to the above, see-sawing around improved risk sentiment and opening slightly higher at 0.5398 this morning. Adding to the improved risk sentiment, a Scottish study reported that the risk of hospital admission from Omicron was reduced by two thirds compared to the Delta and a booster dose offered “substantial” protection against symptomatic infection. To last night's UK data, and everything missed expectations which opened the door for AUD to take advantage. The Current Account figure was forecast for -15.8B, but didn’t even come close to projections with a large miss of -24.4B. Final GDP data was also released last night, with a forecast of 1.3% and a true result of 1.1%, also behind expectations. Revised Business Investment expectations were at 0.4%, but the reality was far from it coming in at -2.5%. No data due from the UK until the new year.
NZD
Whilst AUDNZD managed to post small gains, there are clear headwinds as AUD approaches the 1.06 handle, the pair opening this morning at 1.0580. The Trans-Tasman tug-of-war will most likely be even-stevens until the new year with no economic data due for release from either of the Antipodeans.