RBNZ Surprises with Hawkish Pivot
AUD
The AUD was mixed against most of the major currency pairs in the last 24 hours, overseas happenings the driver for the movements with the local economic calendar bare. At lunch time yesterday the AUD was being dragged higher with the NZD after the RBNZ's surprisingly optimistic change in tone in their Monetary Policy Statement. However AUD gave up most of these gains overnight, with US Equity markets failing to capture excitement; NASDAQ, Dow Jones, and S&P 500 all marginally firmer, gaining +0.5%, +0.1%, and +0.1% respectively. Also failing to inspire AUD buyers, precious metals were mixed with Gold trading weaker at -0.3%, Iron Ore stronger +0.3%, and Copper up +0.5%. A growing concern for the AUD is the growing concern about Victoria recording 12 new locally acquired cases of COVID-19. The state is bracing for imminent lockdown to contain Melbourne’s growing outbreak, with travel restrictions already in place for those entering South Australia. Updates on the situation is expected within the next 24 hours, worth keeping an eye on.
USD
The AUDUSD was making solid gains during yesterday's local session before returning to familiar territory overnight, trading at marginally lower levels than yesterday morning, 0.7739 at time of writing. The USD Index (DXY) managed to bounce off January lows, tracking the US 10-year Treasury yields which also rose 2bps to 1.577%, as market players seem to believe Fed officials’ repeated rejection of the tapering calls despite accepting a transitory jump in inflation. Oil still hovering around the $66 price level this morning, though the swings in crude and product stocks in the last couple of weeks have been noisier thanks to the Colonial pipeline being shut down. The US will release its Preliminary Quarterly GDP data tonight with its weekly Unemployment Claims released at the same time.
EUR
The AUDEUR trading marginally above the levels seen yesterday to trade at 0.6345 this morning. The leading Euro Indices; the FTSE, DAX, and CAC are all trading largely flat with the DAX seeing the only change of -0.1%. There has been no data of note to move currency markets, which will have to wait for next week with CPI data, Monetary Policy Statements, and ECB Conferences drawing attention from markets.
GBP
The AUDGBP also trading at the same levels as yesterday morning, remaining around the 0.5480 at time of writing. Official figures showed China has replaced Germany as the UK’s biggest single import market for the first time on record, partly fuelled by demand for Chinese textiles used for face masks and PPE. So it confused traders when British Trade Minister Liz Truss said the UK was “not to rely much on China”. Little noteworthy data is coming out of the UK in the coming days, and next week looks like a similar forecast.
NZD
The AUDNZD took a nosedive yesterday after the Reserve Bank of New Zealand delivered a firm hawkish pivot, trading at 1.0635 this morning. The RBNZ left its interest rate unchanged, however implied a rate hike is on the agenda, perhaps even for later this year. It revised growth, inflation, and employment projections. Notably, the Bank brought back its traditional OCR (Official Cash Rate) profile as we thought they might, which pencilled in a hike by Q3-2022. AUDNZD now at 3 month lows.