Aussie GDP Contracts for Q3 Amid Heavy Lockdowns
AUD
The AUD has a had a tumultuous trading range for the past few days against most of its peers in Asia, Europe and the United States as a result of Omicron headlines. Yesterday morning, the key local GDP data for Q3 printed a contraction of 1.9%, however this was actually better than expectations of a 2.7% contraction given that Q3 represented a period of heavy lockdowns. This offered AUD a little support, however other key influencers largely abandoned the AUD. Asian equities were largely trading up on Wednesday with the Hang Seng and the Nikkei Index both closing up 0.4%, however the ASX underperformed, closing the session 0.3% lower which signifies its lowest trading level in nearly two months. Commodities followed suit with key minerals like Iron ore and Copper both closing lower 1% and 1.2% respectively. The AUD was also affected adversely by waning risk appetite as the first confirmed case of Omicron was announced in the US. To the data today, and we get Retail Sales and Trade Balance figures at 11.30am, Retail Sales are expected to remain stable at 4.9%.
USD
AUDUSD has had a volatile last 24 hours, AUD coming off worse for wear opening lower at 0.7105 this morning which is only 40 pips away from 1-year lows. The gains AUD made during yesterday's session as a result of better -than-expected GDP data were soon erased with interest after breaking news regarding the first confirmed case of Omicron in the US. Trading ranges have been wider the last few days, over 1% for the last two sessions. Persistent USD strength encouraged by the ADP Employment report overnight which showed that 534k jobs were created in November, down from 570k and marginally higher than expectations of 525k. This bodes well for the offical employment report due tomorrow night. With Omicron swings in risk appetite the flavour of the week, it's no surprise the USD has benefitted from safe haven flows as investors seek the safety of the Big Dollar. Tonight we have some second-tier Fed speak, however markets will be keenly anticipating the official US Non Farm Employment Report due tomorrow night.
EUR
The AUDEUR saw a brief rally yesterday to 0.6328 before ranging back to 2-month lows at 0.6277. With respect to data, results in Europe were mixed with German’s October Retail sales YoY were -4.1%, below an expected -1.7%. Spanish November Manufacturing PMI was 60.7 (61.3 expected), in Italy it was 62.8 (61.1 expected). Final Eurozone Manufacturing PMI increased from 58.3 in October to 58.4 in November. Equities were more bullish where European stock markets rebounded on the open with and Euro Stoxx 50 up 0.4% and this strength was held throughout the session, with DAX and CAC both up over 2% for the day. To the data tonight, and we have only low impact monthly EZ PPI and Spanish unemployment data, before ECB President Lagarde speaks tomorrow night.
GBP
AUDGBP traded in a similar fashion to the above, gaining throughout the day and then being driven lower on risk sentiment in the overnight session, opening this morning slightly down at 0.5348. The continual hawkish stance taken by Gov Bailey of the Bank of England coupled with the lack of encouraging data from Australia recently may be contributing to the strength of the Pound. With discouraging news surrounding Omicron in Australia and the continued optimism of Bailey, the AUD will find it tough to get a leg up without another reversal in risk sentiment.
NZD
The AUDNZD has begun to settle into patterns more common with the pair, finding itself opening slightly lower today at 1.0432. The momentum AUD had gained post last week's disappointing RBNZ interest rate hike of 0.25% has stalled. With no data expected from across the ditch for the rest of the week, today's local Retail Sales and Trade Balance numbers are the last chance for volatility on this pair.