Bank of England Cautiously Optimistic
AUD
The AUD traded at a gain across most major currency pairs overnight, the GBP excluded. Asian Equities closed off their sessions with mixed results, Shanghai Comp down -0.3% and the Nikkei was up 0.5%. The ASX gained 0.1% to 7511.1, its highest ever level and the second time it has closed above 7500 points. Commodities were down overnight, Silver was down -0.4% and Iron Ore was down -0.7%, Gold closed with a modest -0.1% loss at $1804.40/oz. A potentially busy day ahead with the RBA update later this morning which will give us an updated forecast on the trajectory of economic recovery, it is expected to incorporate a decline in GBP in Q3. While the unemployment rate track will be lowered (improved) since May due to better-than-expected recent outcomes, the current lockdowns are expected to take an affect on the near-term forward looking forecasts.
USD
The AUDUSD pair is flirting with the .74 level yet again this morning, trading at a rate of 0.7405 at the time of writing. The AUD benefiting from the improved market sentiment ahead of RBA Governor Phillip Lowe’s testimony and the key US Data overnight. All three major US Equities traded at a gain; both the Nasdaq & Dow were up 0.8% while the S&P500 was up 0.6%. US 10-year yields rose 4bps to 1.22% and Crude Oil rose 1.5% to $69 a barrel. US weekly jobless claims data was generally upbeat with initial claims largely matching expectations as it rose slightly to 385k while continuing claims fell to 2.930 mio, down from 3.296 mio and beating expectations of 3.255 mio. Fed Commentary coming from Waller said that his outlook for the US economy was optimistic with the July Jobs report (due tonight) likely to show very high job numbers. The Labour market appears to be the primary interest of Chair Powell and the FOMC when considering its tapering timeline, the US employment data this evening, for July, may take on the greater importance for markets.
EUR
The AUDEUR pair made some minor gains overnight, currently trading at a rate of 0.6257 this morning. European Equities closed at minor gains with CAC closing up 0.5% and the Dax closing with modest gains of 0.3%. It’s been reported that the Eurozone economy has finally exited a ‘double-dip recession’, data last week showed the reversing of the region's worst economic downturn since World War II. European Union Governments, which have spent nearly 2 trillion Euros since the pandemic aid and stimulus, have released nearly all businesses from lockdown restrictions. The EU is on target to fully vaccinate 70% of adults by Europe's autumn (next month) to help cement the rebound. No noteworthy data for the Eurozone as we head into the weekend.
GBP
The AUDGBP pair is trading at identical levels seen to yesterday morning, trading at 0.5314 at the time of writing. The London benchmark FTSE closed at no movement of 0% with investors likely eyeing off the BoE announcement. Policymakers voted unanimously to leave interest rates unchanged at the current record low 0.1% They announced that they intend to begin unwinding QE once the benchmark interest rate hits 0.5% and will actively consider selling bonds once rate is at least 1%. The 2-year expected inflation was revised slightly higher to 2.1% with a mild tightening bias now in place. Little in the way of economic data with only MPC Member Broadbent speaking this evening.
NZD
The AUDGBP pair had a positive session of trade overnight with the pair trading at 1.05028 this morning. There’s no notable data headed into the weekend for this pair with only the RBA Governor Phillip Lowe’s testimony this morning being the only mention. We're getting closer the the RBNZ's live interest rate decision which will happen on Wednesday week. Markets weighing the chances of a rate hike will be driving AUDNZD until then.