US Taper Talk Tempting Traders
AUD
The AUD was mixed against the majors, but the heaviest movements were losses against the USD and EUR, likely off the back of renewed reflationary fears leading to extra sensitivity to taper talk. It was also another weak session for Commodities with the AUD suffering as a result, Gold just managing gains of +0.1%, Iron Ore unable to sustain the recent highs losing -1.1% and Copper also down -0.2%. US Equities were quiet with the Dow Jones flat, whilst both the S&P 500 and Nasdaq also trading a few ticks higher than yesterday, up +0.3%. Elsewhere, the Australian Capital Territory (ACT) has gone into a seven-day lockdown, keeping Covid woes on the table even as New South Wales’ vaccine rollout is on track to reach Premier Berejiklian’s target of 6 million jabs by the end of the month. It’s a quiet day in Asian data with direction to be taken from risk sentiment and any further Fed Speak from North America.
USD
The AUDUSD retraced it’s recently obtained gains, to trade lower at 0.7340 this morning. US Producer Price Index (PPI) data for July rising past market consensus in all categories, printing 1.0% figures for the Headline and Core figures (MoM). By contrast, price action locally seems to be decelerating, most recently evidenced by yesterday's Consumer Inflation Expectations dipping to 3.3% for August, down from a prior 3.8%. The accelerating inflationary pressure in the US resulted in comments overnight from Fed Speaker Mary Daly who said, “Tapering of asset purchases could start as soon as this year,” matching the recent sentiment of other Fed speakers Esther George, Robert Kaplan, and Thomas Barkin who all teased policy hawks. Looking ahead, there is Prelim UoM Consumer Sentiment coming out of the US at midnight tonight, otherwise looking ahead to Retail Sales data for fresh impetus next week.
EUR
The AUDEUR was also on its heels to trade at 0.6253 at time of writing. European markets generally closed higher with the DAX leading the way with improving by +0.7% and CAC taking gains of +0.4% at the closing bell. The FTSE was the underperformer as it closed down -0.4%. There’s been little in the way of data with all the focus really on US inflationary talks giving the most direction, however what will be weighing on the EUR is the blistering heatwave causing wildfires across Turkey, Greece and Italy over the summer leading to thousands of evacuations and deaths.
GBP
The AUDGBP sitting level with levels seen yesterday, currently sitting 0.5314 this morning. Yesterday afternoon, the UK released a variety of data which showed mixed levels of improvement. The preliminary estimate of the Q2 Gross Domestic Product printed 4.8%, as expected, and improved from -1.6% in the previous quarter. Industrial Production was up 8.3% YoY in June while Manufacturing Production was up 13.9% in the same period. The Goods Trade Balance posted a deficit of -11.988 billion, more than doubling the previous figure and worse than anticipated. Next week will see the release of CPI data which will be of primary interest to the BoE after their recent meetings suggesting they're inching closer to tapering.
NZD
The AUDNZD managed to escape the losses and sit in the green this morning, trading at 1.0480. The Kiwi Dollar fared worse than the Aussie after the aforementioned USD strength, as not much significant data weighed in on the Kiwis. What could give our Trans Tasman counterparts some optimism is NZ PM Jacinta Ardern planning to allow quarantine-free entry to vaccinated travellers from low-risk countries from early next year as part of a phased reopening of its borders that were shut last year due to the pandemic.