Next Week's RBA Meeting Crucial for AUD
AUD
The AUD has been mixed against most majors in the overnight session, with minor movements on each side. US Equities were also mixed with the NASDAQ falling -0.2% whilst the S&P 500 and the Dow Jones were up +0.3%, and +0.6% respectively. The AUD’s latest southbound movements could be linked to the ongoing Covid-19 woes with major parts of Queensland, New South Wales, the Northern Territory and Western Australia witnessing local lockdowns with strict border control. The AUD wasn’t helped by China’s weaker than previous PMI data released yesterday morning, with Manufacturing coming in at 50.9 (51 previous), and Non-Manufacturing 53.5 (55.2 previous). It’s another quiet day domestically, as we’ll have to wait til Tuesday next week to see if the RBA will echo the Fed Reserve's hawkish tone with their Cash Rate Statement.
USD
The AUDUSD lost some ground and slipped back into the 0.74s overnight, trading at 0.7499 this morning. The Greenback found some strength overnight, also reflected by the DXY jumping to the highest level since early April, hitting 92.44 overnight. Contributing to the USD strength was upbeat US ADP Employment Change data for June, beating expectations with a change of +692K new jobs created (+555k forecasted). Additionally, there was a more hawkish tone from Federal Reserve Speaker, Bank of Dallas President Robert Kaplan saying he would like the Fed to start reducing its support for the economy before the end of the year, in part to make an abrupt policy tightening less likely later on. "I would prefer sooner" than the end of the year for reducing the Fed's pace of asset purchases, Kaplan said. At midnight tonight, US ISM manufacturing is due and the employment component in particular could move currency markets if numbers are strong however tomorrow night's official employment report will be the main event.
EUR
The AUDEUR reclaimed some ground overnight to trade at 0.6323 currently. A dip in European Equities might have benefitted the AUD with the FTSE, DAX, and CAC all losing -0.7%, -1.0% and -0.9% respectively. Eurozone headline inflation fell to 1.9% in June, from 2.0% in the prior month, matching analyst forecasts. Meanwhile, the core reading remained at 0.9%, printing in line with estimates, though the currency pair saw little change following the data. This afternoon will see a variety of PMIs with German Final Manufacturing PMI leading the way. Just before that, ECB President Lagarde is speaking over satellite before the Committee on Economic and Monetary Affairs. If her recently cautious tone continues the AUD may have room to squeeze higher.
GBP
The AUDGBP is trading relatively flat to sit at 0.5421 this morning. It was a subdued session with the only data out of the UK was Finalised Q1 GDP seeing a 1.6% contraction vs the estimate of -1.5%, though this saw no reaction from currency markets. Instead, attention is turned to BoE Governor Bailey’s speech this evening, which could hint at a willingness to hike rates in 2022. Forecasters are expecting rhetoric to lean towards tapering QE again soon, especially given the recent policy statement acknowledged that the Bank “will have the opportunity to assess the economic outlook more fully in the context of its August Monetary Policy Report”.
NZD
The AUDNZD lost out overnight, to trade at 1.0721 at time of writing. It’s been a quiet week for the Kiwis however there was some demand for the NZD with the ANZ Activity Outlook Index improving to 31.6% in June from 29.1% and beat the market expectation of 29.1%. ANZ Business Confidence Index edged slightly lower to -0.6 from -0.4 in June, which eased the pressure on the AUD.