AUD Staggering Off Lows
AUD
The AUD extended its gains overnight and trades at fresh one-week highs across most major currency pairs. Asian Equities made strong gains on Tuesday, with the Nikkei rallying 1.9% while the Nikkei gained 0.2%. Australian shares posted strong gains following a rebound across the US and Euro markets as fears of Omicron eased, the ASX 200 Index closed 1% higher at 7,314 points. The main driver of recovery on Tuesday appeared to be the market's pricing out of prior Omicron fears and perhaps the most important factor for the AUD, the latest RBA rate decision. As expected, the bank held interest rates at 0.1% and pledged to continue buying bonds at a A$4B weekly pace until February. But the bank, whilst conceding that Omicron was a risk to the outlook, said it did not think the new variant would derail the recovery any further. It’s another quieter day locally with little data of note.
USD
The AUDUSD has continued to power higher throughout the session on Tuesday, regaining the 71 handle and trades at a rate of 0.7118 at the time of writing. Another positive session on Wall Street saw the Nasdaq gain a significant 3.1%, the S&P 500 up 2.1% while the Dow Jones closed 1.5% higher. The positive risk sentiment helped oil gain a further 3.6% rise while the US 2-Year yields were 5.2bps higher to 0.683%. Little in the way of data out of the US with Q3 Non-Farm Productivity revised down to -5.2% against expectations of -4.9% while Unit Labour Costs were revised up to 9.6% against expectations of 8.3%. The October trade deficit meanwhile was slightly wider than expected at $67.1 bio. Little in form of new market data with the JOLT’s job openings being the only data of note.
EUR
The AUDEUR gained some follow-through traction to trade as high as 0.6331 before coming back to trade at a rate of 0.6314 this morning. European stock markets rose at the open on Tuesday as investors fears eased over the new Omicron variant. In the Zone, the DAX gained 2.8% and the CAC outperformed 2.9%. In early low-tier data, German industrial production grew by 2.8% in October, beating the forecast of 1%. The German ZEW index for December saw mixed results with the current assessment worse at -7.4 (5.7 expected) with expectations coming in better than forecast at 29.9 (25.4 expected). There is a lack of data in the northern hemisphere with tonight's speech from ECB President Lagarde being the only data on the horizon.
GBP
The AUDGBP pushed higher to test new resistance, trading as high as 0.5379 before opening slightly lower at 0.5374 this morning. London’s FTSE has fully recovered from the Omicron variant fears, rising again as mining stocks took the lead, the blue-chip index climbed 1.5% to close at 7,339. A lack of local data overnight saw the BoE’s Chief CBI conference in focus. The BoE’s monetary policy chief has said inflation is likely to soar “comfortably” above 5% next spring when the energy regulator Ofgem raises a price cap affecting millions of households. Pill also indicated that he was preparing to vote in favour of an increase in interest rates on 16 December after official figures suggested concerns about a jump in unemployment at the end of the furlough scheme had proved unfounded. Only low tier data due this evening in the form of RICS House price balance.
NZD
The AUDNZD followed suit and rallied to fresh one-week highs, trading at a rate of 1.04839 at the time of writing. The broad risk-on market tone which is seeing global equities and commodities perform well across the board seems to be the main driver of upside in risk-sensitive currencies such as the AUDNZD pair. In low-tier data, Fonterra announced the details of their latest dairy auction with the GDT Price Index up by 1.4% while Whole Milk Powder prices rose by 0.6%. No reaction to the data. Looking ahead, there are no notable NZ economic events for the remainder of the week so focus will remain on broader risk sentiment and development surrounding the coronavirus saga.