AUD in the Firing Line for Bears

AUD

The AUD continues its somber mood, failing to recover any losses from a rough week as it traded within tight ranges or lower against the majors. In local data, The ABS said that the value of Retail Sales in Australia advanced a seasonally adjusted 4.9% on month in October, coming in at A$31.130 billion. That was in line with expectations following the 1.3% gain in September. On a yearly basis, retail sales advanced 5.2%. Asian Equities haven’t quite recouped losses from risk sell-off facing equity markets, with the ASX opening initially lower before spending the day trying to get back to even. The Hang Seng was up +0.55%, contrast the -0.65% loss posted by the Nikkei. Commodities had a relatively strong session with Iron Ore leading the charge gaining +2.1%, Copper up +1.1% and Gold up +0.2%. The strong performance in the sector would typically see an uptick for the AUD, however the overwhelming uncertainty derived from the Omicron variant of Covid-19 leaves the risk-susceptible Aussie right in the firing line for bears. With little data of note to be released locally today, health updates will remain the focal point of attention until the RBA comes out with their Cash Rate Statement on Tuesday next week.

USD

The AUDUSD now finding solace in the high 0.70 levels capping off what has been a horror week for the AUD, trading at 0.7092 this morning. Despite the ongoing uncertainty, US Equity markets all bounced back overnight with the Dow Jones trading +1.8%, the S&P 500 +1.5% and the NASDAQ up +0.6%. Yesterday saw a litany of commentary from Federal Reserve speakers as Bostic, Daly and Quarles all promoted the notion that the Fed may be forced to taper asset purchases faster than expected. They all backed up Chair Jerome Powell’s recent statements reiterating that inflation has gone up faster than expected due to the virus, vaccines and fiscal support. Adding to the hawkish tilt, US bond yields were ticking higher to drive demand for the Greenback. US weekly Jobless Claims were marginally better than expected with initial claims printing at 222k beating estimates of 240k, while Continuing Claims at 1.956m to beat estimates of 2.003m. Moving forward will see the US employment report due to be released this evening, with forecasters suggesting November will likely show another strong month of payroll gains, reflecting continued labour market momentum.

EUR

The AUDEUR remains trading at levels seen yesterday morning, still travelling at 0.6273 at time of writing. European Equity markets were all in the red as the DAX and CAC both saw losses around the -1.4% mark as the Omicron variant starts to make its presence heard around Europe. Some optimism for a slither of Europe as the number of people registering as jobless in Spain fell -2.28% in November from October, as unemployment reached pre-pandemic levels with 3.18 million people out of work. European Central Bank policymaker Fabio Panetta said that inflation and the new pandemic wave is endangering the EU’s recovery, although earlier this week, he noted that there’s no need to tighten monetary policy to control inflation, driven by temporary factors. Tonight there’s a handful of finalised PMI reports from Italy and France, as well as hearing from ECB President Lagarde.

GBP

The AUDGBP feeling the heat to be trading lower on the day, sitting at 0.5329 at the moment. No meaningful data out of the Brits with risk and Omicron taking the front-foot as the benchmark FTSE 100 index ended -0.6% lower as the new variant continues to run rampage over markets. Markets will still be dissecting commentary from Governor Andrew Bailey ahead of the BoE’s next interest rate decision. He noted the economic impact from COVID-19 has faded since the start of the pandemic but still remains strong, with new variants posing the biggest threat to a return to normal. It was also mentioned the inflationary pressure from supply chain difficulties and increased demand for consumer goods instead of services during the pandemic, but did not answer if he thought Omicron will prolong these problems.

NZD

The AUDNZD following suit to trade well below yesterday's levels, trading at 1.0402 this morning. The Kiwi Dlooar flying under the radar with little data or macroeconomic news to grab currency markets attention at the moment. Market participants will be looking towards the slurry of US economic data released tonight, namely Non-Farm Employment.