Today's Employment Data to Shape Short Term AUD Fortunes
AUD
The AUD managed to make some slight gains across most currency pairs in the last 24 hours, except against NZD which forged ahead strongly after the RBNZ meeting (see NZD section below). US Equities remained relatively flat, with the US 10-year Bond Yield dropping 6.4bps to 1.352%. The VIX, which is an index that measures the level of risk and fear within the market, dropped -5.0%, which is at odds with our domestic situation with the recent Sydney and Melbourne Covid Outbreaks. The AUD commonly thrives in a market with positive risk sentiment, as such the movement may have also aided the AUD. Commodities were slightly down during the overnight session, with Iron Ore and Copper dropping 0.4% and 1.0% respectively. However, the AUD still managed to make some gains against most major currency pairs. Australian Employment Data scheduled to be released at 11:30 this morning will be the main event for the day. The time period for the data will not take into account the recent Sydney lockdowns, however it will capture Melbourne's continued emergence from its extended lockdown. Last month's employment data was extremely positive (the Unemployment Rate dropping to 5.1% from 5.4%) and given employment data is notoriously fickle, there's potential for a pullback. China’s Quarterly GDP is also scheduled to be released today; markets still expect a strong growth of 8% due to the recent peak in China Exports.
USD
The AUDUSD saw some modest gains overnight, currently trading in at 0.7484 at time of writing. US Equities had a mixed performance, with the S&P500 and NASDAQ moving +0.2% and -0.2% respectively. Despite the AUD’s recent high correlation with US stocks, the AUD still managed to push north. US Monthly PPI printed above expectations at 1% (vs exp 0.6%), however the data was relatively subdued by FED Chair Powell reiterating that the recent high inflation is still seen as transitory at that the economy has a long way to go. Markets are in waiting for US unemployment claims scheduled to be released later tonight, followed shortly by another testimony from Fed Chair Powell.
EUR
The AUDEUR stayed relatively flat, currently trading in at a rate of 0.6321 at time of writing. Europe’s Yearly CPI is scheduled to be released tomorrow night. Markets will be watching to see if recent surges in the Covid Delta variant has had a significant effect on Europe’s recovery. It will also be a good opportunity to compare against America’s strong inflation data released at the start of the week.
GBP
The AUDGBP also moved north during the overnight session, currently trading in at 0.5398 at time of writing. UK Yearly and Monthly CPI both beat expectations, coming in at 2.5% (vs exp 2.2%) and 0.5% (vs exp 0.2%) respectively. However, despite the strong data, the AUD still managed to come out as the stronger currency during the overnight session. The UK unemployment rate is scheduled to be released later this afternoon.
NZD
The AUDNZD took some significant losses yesterday, currently trading at a rate of 1.0628 at time of writing. The Kiwi Dollar was the obvious standout across the board after the RBNZ announced it plans to completely end the LSAP (Large Scale Asset Purchase) Program on the 23rd of July. Despite them still holding the Official Cash Rate at 0.25%, the announcement has signalled to investors a possibly near-future rate hike from the RBNZ. The generally accepted path out of Covid-induced monetary policy settings is that an end to QE (printing money) will act as a precursor to any increases in interest rates. The NZD still looking to finish the week on a strong note with Quarterly CPI also scheduled to be released tomorrow.