AUD Starting the Week on the Back Foot

AUD

The AUD sitting lower against the majors over the weekend with weak commodity prices hampering the local dollar. The value of Australia’s top performing export commodity, Iron Ore, slumped by -1.7% with China accelerating measures to scale back its dependence on Aussie Iron Ore. To put extra fuel on the fire, Gold also felt the hurt losing -2.4%. Wall St was little changed, with the Dow closing up around +0.4%, the S&P gaining +0.2% whilst the Nasdaq remained heavy to close down 0.4%. China's Trade data was mixed over the weekend with export growth unexpectedly slow in July, while imports also lost momentum. Fingers were pointed at outbreaks of COVID-19 cases, which created a slowdown in the country's industrial sector in the second half even as easing global lockdowns boost commerce. Looking forward, it’s a quieter week in the macroeconomic data calendar, though Chinese inflation data for July being released later this morning is likely to garner some interest. Forecasters are predicting Producer Price Index (PPI) may remain unchanged at 8.8% YoY whereas the CPI is expected to ease from 1.1% to 0.8% on YoY.

USD

The AUDUSD is well bellow levels seen at the end of last week, slipping from the comforts of 0.74s to trade at 0.7337 this morning. One of the biggest catalysts would be the strong Employment Data from the US, ending the US Dollar index (DXY) higher on Friday. The headline Non-Farm Employment number rose by 943,000 jobs versus June's increase of 938,000 (which was revised up from 850,000) and comfortably surpassed the market expectation of 870,000. Further details revealed that the Unemployment Rate declined to 5.4% from 5.9% in June and the Labor Force Participation Rate improved modestly to 61.7%. The strong jobs report rejected the market fears that the Delta covid variant gradually tames the economic recovery. The optimism favoured the US dollar, especially with policymakers apparently at the table preparing to unveil a multi-billion dollar infrastructure spending package. Looking ahead, FOMC speakers continue to drive short term market volatility and there are several public remarks scheduled throughout the week. Of greatest relevance should be comments from voting members Bostic and Barkin on later this evening.

EUR

The AUDEUR opens lower here also, sitting at 0.6242 at time of writing. European Equity markets were higher with small gains on the DAX, gaining +0.1% while the CAC and IBEX gained +0.5% and the MIB closed more than 1% higher on the day. The Eurozone economy continues to perform well yet the European Central Bank still shows no inclination to tighten monetary policy; a combination that lends itself to a stable currency in the current environment. Note that figures released late in July showed that Eurozone economic sentiment hit a record high that month and that the Eurozone unemployment rate fell to 7.7% in June from a revised 8.0% in May and better than the expected 7.9%. We’ll see if there’s any further improvement with the Zew Economic Sentiment data released tomorrow evening.

GBP

The AUDGBP is trading lower over the weekend to sit at 0.5288 this morning. The Pound continues its dominance over the AUD even a week after the BoE formally and pointedly acknowledged for the first time that some “modest tightening” of monetary policy is likely to be necessary in order to bring inflation back to its 2% target over the coming years. But the Pound could be likely to consolidate recent gains over the coming days as the market awaits Thursday’s GDP data, which will reveal whether the UK’s economic recovery is meeting elevated expectations.

NZD

The AUDNZD was trading within tight ranges to sit marginally lower, trading at 1.0490 at time of writing. It was a quiet weekend from the Kiwis, with the aforementioned Chinese Trade data keeping the Kiwis in check. Moving forward, currency markets are anticipating a potential rate hike from the Reserve Bank of New Zealand (RBNZ) at its August 18 meeting next week, after the RBNZ took a bullish tilt in their last monetary policy meeting.