AUD at the Mercy of Today's RBA Statement

AUD

The AUD was sitting either side of even across the majors as Australian financial institutions return to work today after a bank holiday on Monday. The only exception being the AUDUSD pair which took some losses and a step back since Friday evening. What wouldn’t have helped the AUD was some weaker data releases yesterday with Australian AiG Manufacturing Index declining to 60.8 in July from 63.2 in June while the ANZ Job Advertisements contracted by 0.5% after rising by 1.5% in June. Additionally, recently surging commodities took a breather as both Gold and Iron Ore lost -0.2%. What could offer a shift in direction after a rough couple weeks for the AUD is the RBA's Cash Rate Statement this afternoon, though markets expect the rate to be unchanged at 0.1%. In its latest policy meeting, the RBA announced that it will reduce the pace of asset purchases to AUD$4 billion from AUD$5 billion and speculation suggests that the bank could opt to backtrack on that adjustment given the uncertainty caused by the rising cases of Delta variant.

USD

The AUDUSD recovered some of its losses off the back of some US-based weakness, but still trading lower than levels seen on Friday, sitting at 0.7365 this morning. Weaker than expected US ISM Manufacturing data weighed in on US equity markets overnight. US Markit Manufacturing PMI for July was revised up to 63.4 against expectations of no change at 63.1.  Released shortly afterwards, ISM Manufacturing for July fell to 59.5, down from 60.6 to come in below expectations of 61.0. As a result, US equities felt the squeeze as the S&P 500 and the Dow Jones ultimately finishing down by -0.3% while the NASDAQ fared better and was flat for the day. Looking forward, we’ll see further economic recovery indicators as the ADP Non-Farm Employment Change is released later tomorrow night.

EUR

The AUDEUR lost out due to generally strong data out of Europe, just managing to hold on to the 0.62 mark, trading at 0.6202 this morning. In recent Manufacturing PMIs for July Spain kicked things off at 59 (59.5 expected) with Italy at 60.3 (61.5 expected). France came in at 58 (58.1 expected), Germany at 65.9 (65.6 expected) and finally the Euro Zone reading came in at 62.8 (62.6 expected). In other European data, powerhouse Germany’s retail sales jumped by 4.2% in June, comfortably beating the +2% forecast. As a result of the strong data, European Equities saw some decent gains, the FTSE, DAX, and CAC all seeing green, gaining +0.7%, +0.2% and +1.0% respectively. Tomorrow will see the Spanish release some Unemployment Change data with forecasts predicting a loss of -115.5K.

GBP

The AUDGBP is sitting marginally higher than levels seen on Friday, currently sitting at 0.5301. UK’s finalised manufacturing PMI failed to move currency markets. UK factory activity dropped from 63.9 to 60.4 in July, with the finalised figure matching the preliminary estimate and therefore failing to prompt much movement. While the figure reveals the fourteenth successive month of factory output expansion, rising prices, strained supply chains and staff shortages undermined further growth. In Covid news, the first passengers have been arriving in the UK after rules changed to allow people fully vaccinated in the US and EU to avoid quarantine. Time will tell what effects this has on health conditions.

NZD

The AUDNZD sitting marginally lower to trade at 1.0554 this morning. Early this morning, the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr proposed tighter lending standards to control the house prices across the ditch. This is after earlier attempts in the year to curb the housing market boom have had little success so far. What didn’t help NZ currency pairs was NZ Prime Minister Jacinda Ardern having to take a COVID-19 test after picking up flu symptoms, with Ardern stepping back from her duties for the day due to the sickness and the deputy Prime Minister Grant Robertson will take on the responsibilities for the time-being. Looking ahead, there’s Employment data out of the Kiwis which could offer fresh impetus.