Omicron Fears Lead AUD Lower

AUD

The AUD is trading marginally lower across most major currency pairs after a volatile session in the late trade on Tuesday. Growing market worries about potential economic fallout from the new coronavirus variant has taken a recent toll on global risk sentiment. The mood deteriorated further late yesterday afternoon, after the Chief Executive of Moderna warned that existing vaccines could be much less effective at tackling on the new strain of Covid (Omicron) than earlier strains, acting as further headwind for the Aussie. Asian Equities posted a mixed session with the Nikkei diving -1.6% while the Shanghai Comp made no movement. The ASX gained only slightly with the benchmark index closing up 0.2%. Looking ahead locally, the Australian Q3 GDP is on the docket today at 11:30am, with expectations of a fall of -2.7% due to the effects of lockdowns in the quarter. The RBA’s November SoMP (statement of monetary policy) assumed a slightly smaller decline in output. Domestic demand is expected to have fallen more sharply than GDP, with particular weakness in consumer spending.

USD

The AUDUSD reclaims the 0.71 handle after shedding to a new yearly low of 0.7062 overnight, coming in to trade at a rate of 0.7128 this morning. All Three major US Equities were -1.6% lower in the late trade as vaccine efficacy concerns reversed the uptick in market sentiment. Crude oil headed for the worst monthly loss this year with Brent falling 2.8% to $71.40 a barrel, an 11-week low. US 10-year Treasury yields sank 6bp to 1.44% below levels seen on Friday. In early data, Chicago PMI for November printed at 61.8, down from 68.4 and below expectations of 67.0. Released afterwards, November Consumer Confidence fell to 109.5, down from a negatively revised 111.6 and below expectations of 110.9. Fed Chair Powell sparked significant moves overnight after telling a Senate Committee that it is time to stop using the word ‘transitory’ in regards to inflation. He said that the Fed’s test for inflation had clearly been met, that inflation could no longer be considered transitory and it was possible that the Fed taper could end a few months ahead of expectations. US yields ticked higher on his statements as one would expect. To the data ahead, the US Docket will unveil the ADP Employment Change for November, a prelude of the official nonfarm payrolls release on Friday, while the Australian docket will feature the Q3 GDP, yearly and quarterly.  

EUR

The AUDEUR is trading at a loss this morning after sliding to lows of 0.6261, before coming back to trade at 0.6284 this morning. European Equities drifted lower in the session with the DAX declining -1.2% and the CAC down -0.8%. In economic news, flash estimate from Eurostat showed the Eurozone inflation accelerated more than expected in November on energy prices. France’s PPI MoM came in at 2.9% MoM (1.7% previously). France’s inflation rate rose to its highest level in 13 years, with CPI YoY printing 2.8% (2.6% expected). In the Eurozone, inflation jumped 4.9% YoY for November above expectations of 4.5%. Meanwhile, The German November unemployment rate was 5.3%, below a previous 5.4%. The number of unemployed totalled 1.40 million, which was a decline of 17,700 or 1.2% from the previous month. There’s a flurry of European Data on the docket this evening with the EuroZone Manufacturing & Services PMIs being the key data of note.

GBP

The AUDGBP followed suit to trade lower after risk assets came under pressure overnight, with the pair trading at a rate of 0.5356 at the time of writing. The London Benchmark resumed it’s Omicron-led sell off on Tuesday with the Blue-chip index down -0.7%. A lack of local data has seen both currency pairs face worries about the economic fallout from the spread of the new coronavirus variant. Furthermore, the BoE also remains to be the focus for markets. A single hike before March seems to be all but certain, but Omicron may hold the Monetary Policy Committee (MPC) off until February. There is a lack of local data on the docket this evening with BoE Governor Bailey and the UK Final PMI reading being of key note.

NZD

The AUDNZD modestly falls amid a risk-off market sentiment, with the pair trading at a rate of 1.04390 this morning. Comments of the Moderna’s CEO said that current vaccines would not be effective against the newly discovered Omicron strain, dampening the market sentiment as risk-currencies faltered. To the data today, the New Zealand economic docket will feature Building Permits (seasonally adjusted) for October on a month-over-month reading. The release expected to be a miss as markets steer their focus toward todays Australian Docket featuring the Q3 GDP figures.