AUD Finally Stems The Bleeding
AUD
Support for AUD finally surfaced overnight after what has been a difficult last week. Local equities posted modest gains, the ASX was up the most at 0.8%, Shanghai Comp up 0.7% and the Nikkei was up 0.6%. Commodities were relatively subdued, Gold made no movement, Silver was up 0.4% while Iron Ore was down -2.3%. Australian Data yesterday released at the beginning of the day was discouraging, as the June Westpac Leading Index printed at -0.06% in June, down from the previous 0.04%. Additionally, the preliminary estimate of June Retail Sales printed at -1.8% worse than anticipated. Risk sentiment improved in the overnight session which opened the door for AUD to reverse at least a part of its recent losses (see below sections for details). No local data due today, but the ECB Policy meeting and US unemployment claims to be main events in market movements this evening. Local Covid numbers also to weigh in late morning.
USD
The AUDUSD pair bounced off 8-month lows overnight at which time the AUDUSD was in the 0.72s, coming in to trade at a rate of 0.7355 at the time of writing. An improvement in risk sentiment had benefited the AUD as we snapped up a four-day losing streak. The positive sentiment was evident with gains in all three US equity indices with both the S&P500 and Dow Jones gaining 0.8% and the Nasdaq up 0.9%, and a solid 7bp bounce in US 10-year yields. Oil was also well supported and rose 4.5% to trade just 1% off the weeks high. To the data this evening, the US unemployment and ECB policy meeting to be the key drivers in market movements.
EUR
The AUDEUR pair snapped back from its 8-month lows, dropping to 0.6198 overnight before coming back to trade at a rate of 0.6235 this morning. European Equities posted impressive gains overnight, the DAX was up 1.4% and the CAC gained 1.9%. Today’s data calendar will be dominated by the North Hemisphere with the ECB policy meeting being the highlight. Macquarie Strategy expect no change to ECB policy settings this evening, but the forward guidance in the policy statement will need to be updated to incorporate the results of the new Strategy Review. Lagarde has said as much, so it should not surprise the market. A form of words will need to be found to make it clear that ECB easing can continue even after the pandemic QE programme (PEPP) is scheduled to end on March 2022, perhaps by extending the PEPP’s lifespan, or by handing over to another equally-powerful facility.
GBP
The AUDGBP continues to trade in relatively tight ranges, currently trading at a rate of 0.5363 at the time of writing. Investors will be waiting on the BoE Monetary Policy Committee’s Member, Broadbent, speaking tonight. Traders also closely watching Covid developments in the UK now that all restrictions have been lifted. Investors might also refrain from placing any aggressive bets today, rather prefering to wait on the sidelines ahead of the European Central Bank meeting this evening.
NZD
The AUDNZD pair managed to buck the trend to trade at a loss, the pair currently trading at a rate of 1.05597 at the time of writing. the Delta variant continues to spread in Australia, slowly followed by accompanying lockdowns, New Zealand continues to close its borders to different Aussie states, South Australia being the latest victim. There is no significant Kiwi data on the docket moving into the weekend with only the upcoming ECB Policy meeting to be the main event for markets this evening.