AUD Finds Relief through Injection in Investor Confidence
AUD
The AUD finding some support overnight, backed by an improvement in market sentiment with stimulus optimism on the menu (see more in USD section). Commodities were mixed with Gold trading sideways after its recent drop, Copper gaining +1.4%, but Iron Ore had a strong rebound gaining +2.9%, curbing the recent downward run and giving the AUD some support. It was a mixed session for US Equities with the Dow Jones gaining +0.5%, the NASDAQ down -0.5%, whilst the S&P 500 was unchanged on the day. Yesterday the NAB Business Confidence index slumped to -8 points in July from 11 points in June, displaying that business sentiment tumbled in July as Sydney’s outbreak of the delta strain of coronavirus forced even tighter stay-at-home orders and leaks of the virus prompted snap lockdowns in other major cities. Worth noting that this is the worst level of business sentiment since October last year. Moving forward, today we have local Westpac Consumer Confidence for August, which may entertain ahead of the main event tonight with US July CPI figures.
USD
The AUDUSD trading higher to sit at 0.7349 at time of writing. What helped the AUD was the buoyant market sentiment after the US Republican-backed stimulus finally made it through the Senate on Tuesday. The risk-based AUD support was able to overcome general USD strength as the DXY rose for the third consecutive day to threaten July’s high as the USD$1.2m trillion infrastructure package injected some confidence into currency markets. US 10-year Treasury yields rose for the five consecutive days, up 3.7 basis points to 1.354%, as optimism concerning the US economy backed by the stimulus and upbeat jobs report, added momentum to the Fed’s tapering considerations. Tonight the US will release their aforementioned CPI data for July, with the outcome being key for the Fed’s ‘taper timeline’ with stronger than expected Non Farm Payroll last Friday, many analysts are weighing the potential of the Fed starting the taper earlier than expected.
EUR
The AUDEUR trading at its highest level in August, sitting at 0.6269 this morning which represent 2 week highs. The AUD saw the benefit of some weaker than expected data out of Europe last night. The German ZEW Survey Expectations came out at 40.4, substantially below expectations of 55. German ZEW Survey Current Situation Survey printed 29.3 also missing expectations of 31. Following this disappointing trend, the Eurozone ZEW Survey of Expectations came out at 42.7 down from a previous 61.2. This didn’t have much impact on European equities as they remained muted with the FTSE, DAX, and CAC taking gains of +0.4%, +0.2%, and +0.1% respectively, however the results did open the door for AUD to gain back recent losses. Germany will release CPI data this evening, though as it is only finalised data, is not expected to move markets.
GBP
The AUDGBP managed to pull itself out of the 0.52 levels and back into the 0.53s to trade at 0.5309 this morning. It’s been a quiet 24 hours for the Brits with little macroeconomic data out of the UK. There have been mixed reactions to the Covid situation in the UK after fears that the ''Freedom Day'' removal of restrictions would result in a rapid escalation of Covid in the UK, but extraordinarily, COVID-19 cases have been falling in a dramatic drop.
NZD
The AUDNZD managed to buck the trend and remain even this morning, currently trading at 1.0483. New Zealand Finance Minister Grant Robertson along with NZ Government have altered the RBNZ’s high-level objectives, powers, functions, governance, and funding arrangements by replacing the RBNZ Act of 1989, with Governor Orr saying, “Our new legislation clarifies what we're here to achieve, including promoting and protecting financial stability and ultimately the prosperity and wellbeing of all New Zealanders." Currency markets were largely unmoved.