Improved Sentiment Helps AUD Bounce
AUD
The AUD managed to finally reverse the rot in the last day, making gains across all major currency pairs overnight. Confidence was up as local Equities posted significant gains with the Nikkei up 1.8%, Shanghai Comp 1.5% and the ASX snapping up a 5-day losing streak yesterday in what was a good start to the week for Equities. Commodities were mixed with Gold posting impressive gains of 1.4% just reaching levels above $1800/oz however Iron Ore dropped a minor -0.5%. While covid woes could be considered as a major drawback, the latest recovery in Equities and Gold, backed by broader US dollar weakness favored the AUD buyers in the overnight session. It’s a quieter day ahead for local markets with the focus firmly on the Covid situation in Australia. NSW is currently the most infected state with 800+ infections yesterday however it now has the fastest vaccination pace in the world (albeit from a slow start), keeping optimists hopeful.
USD
The AUDUSD posted solid gains in the last 24hrs, bouncing out of almost 10 month lows and trading at a rate of 0.7213 at the time of writing. A strong reversal in risk sentiment to start the week saw the US Equities rally with Nasdaq up 1.5%, the S&P500 up 0.9% and the Dow was up 0.6%. Oil also reversed and gained 5.4% to trade at $65.40 a barrel and US interest rates were flat. Weaker US data overnight also opened the door for AUD, the US Manufacturing PMI for August dipped from 63.4 to 61.2 to fall short of expectations of 62.0 while the Services PMI fell from 59.9 to 55.2 to be well short of expectations of 59.2. The combined results saw the Composite PMI fall to 55.4 from 59.9. Looking forward there’s a lack of major data/events on the calendar this week until the Jackson Hole Symposium at week's end. News on coronavirus, the vaccine rollout and central banks will be the key to follow for this week’s catalyst.
EUR
The AUDEUR pair trades at a rate of 0.6140 this morning after one of its biggest daily jumps in months. European Equities were up overnight with the CAC up 0.9% and the DAX made modest gains of 0.3%. In some early data, the European morning saw the release of the flash PMI numbers for August. Spain kicked things off with manufacturing at 57.3 (57.2 expected) and services at 56.4 (56.3 expected). Germany says manufacturing disappoint at 62.7 (65.0 expected) with services marginally better than forecast at 61.5 (61.0 expected). The Eurozone reading saw manufacturing at 61.5 (62.0 expected) with services at 59.7 (59.5 expected). Little in the way of data this week with the German IFO business climate being the only noteworthy mention.
GBP
The AUDGBP followed suit to make a gain overnight, trading at a rate of 0.5255 at the time of writing. The London benchmark FTSE posted modest gains of 0.3%. Yesterday the UK IHS Markit and PMI data for August showed an abnormally large slowdown as supply chain and staffing issues arise. At 55.3 in August, down from 59.2 in July, the headline seasonally adjusted Services PMI dropped for the third month running, Manufacturing PMI showed 60.1, down from their previous 60.4. Chief economist at IHS Markit Chris Williamson stating that “Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter.” No other noteworthy data on the docket this week.
NZD
The AUDNZD pair was slightly higher than levels seen to yesterday morning with the pair posting a rate of 1.04606 at the time of writing. Yesterday, PM Jacinta Ardern extended New Zealand’s coronavirus lockdown, saying the current outbreak has not peaked as criticism mounts of her strategy to eliminate covid amid the slow rollout of its vaccination program. The first case of the highly transmissible Delta variant breached NZ last week and has already spread to 100 total cases by yesterday. This morning's Retail Sales for the second quarter showed a decent gain of 3.3% which was comfortably better than expectations and higher than the previous quarter, currency markets were unchanged on the release.