AUD Bounces Slightly Ahead of RBA at 2.30pm Today
AUD
The Aussie dollar bounced off yesterday morning's lows, recouping a small portion of the losses into the weekend. This was assisted by a recovery in other risk assets such as equities with the ASX gaining 0.1%. The Australian Economy stands at a crossroads, recent data shows the Economy is bouncing back; inflation is up above RBA’s target of 2.0%, a relatively resilient labour market and recent data indicating manufacturing and service sectors are doing well. Yet continued border closures to international tourism, hospitality and education means our economy is not operating at the maximum level. These headwinds combined with poor risk sentiment due to the fast spreading Omicron variant has meant a volatile period for the Aussie dollar as a risk currency, seeing it plummet to 12-month lows against the likes of the Greenback. Whilst we are assured that the RBA will not increase interest rates at this afternoon's rate decision, the accompanying statement will be poured over by market participants for clues as to a potential finishing of QE in the February meeting or indeed anything that indicates rate hikes earlier than the currently pencilled in Q4 of 2023.
USD
AUDUSD has recovered half a cent since yesterday morning's lows, having regained the 0.70 handle and trading now at 0.7050. The move could simply be put down to profit taking after such a pronounced move lower, however risk was also on the improve with US equities rebounding strongly overnight; the Dow Jones up 2.1%, the S&P 500 up 1.5%, while the NASDAQ was trading up 1.2%. U.S 10 year yields gained 8.7bps to 1.43% and Crude Oil climbed 5.4%. Little in form of new market data tonight, short term movement to be driven by today's RBA meeting. Looking further into the week we will see the important CPI data on Friday evening.
EUR
AUDEUR recovered a full 1% since yesterday, trading at 0.6244 at time of writing. In early data German factory orders fell by 6.9% in October, far worse then the 0.3% contraction that was forecast, opening the door for the AUD to retrace earlier losses.
Sentix Investor Confidence was also down to 13.5 against forecasted 14.5 and 18.3 previous, in what was a night of weak European data releases. Ahead tonight, we have Economic Sentiment data to wrap our heads around, both for Germany and the EZ as a whole.
GBP
A similar story here, AUD has recovered overnight to sit back above the 0.53 handle, trading at 0.5314 at the moment. Late yesterday MPC Member Broadbent Spoke attempting to console the market and reinforcing ideas that there wont be risks of 1970s style inflation spirals. If anything this assisted AUD to recover on a positive shift in risk sentiment. UK Construction PMI up 55.5 against forecast 54.9 and previous 54.6, news that will be pleasing to the BoE as they deliberate over what markets expect to be an imminent rate hike. Only low tier data due this evening in the form of Halifax House Price Index.
NZD
AUD made an impressive 1 cent recovery against NZD, reclaiming 1.04 and trading at 1.0436 at time of writing. With the AUD trading at such low levels, profit taking is the likely explanation for the recovery head of today's RBA meeting which is more than likely to come and go without fanfare due to the overwhelming expectations of markets for no change in direction before the next meeting in February next year.