ECB: Steady As She Goes

AUD

The AUD is trading even against most majors barring the GBP which lost out, in what was a relatively subdued session despite the anticipated hype from European Central Bank meetings. US Equity Markets were off the mark again with the S&P 500 and the Dow Jones drifting lower by -0.4% each, whilst the Nasdaq was flat on the day. Asian Equity markets were deep in the red after China announced harsher measures on the gaming sector. Looking closer locally, the ASX experienced a dramatic broad-based sell-off on Thursday, down -1.9%. What might have given the AUD some further strength was increasing Iron Ore prices seeing +1.3% gains, whilst Copper also putting up some strong numbers up +1.1%. There’s no more notable domestic data released this week, with a speech from the RBA’s Gov Lowe on Monday to kick us off next week.

USD

The AUDUSD finding some comfort in the 0.73 levels in recent days, trading at 0.7368 this morning. The Greenback was initially stronger in session but the USD fell alongside US Government Bond yields. The yield on the 10-year Treasury note fell to 1.287%, piercing the 1.30% critical threshold after a disappointing 30-year note auction. The US auctioned 30-year bonds at 1.91%, down from 2.04% previously. It looks like a date for any reduction in QE is being pushed back further as the Fed’s Bostic believes the Fed will be able to pull back on its asset buying campaign this year, though does not expect a decision at the September meeting. US President Biden attempted to address the worrisome risk catalyst conditions while saying, “We are in a tough stretch on covid and it could last for a while.” And pushing for a six-pronged strategy which includes extra vaccination programs to progress out of the pandemic. Later tonight, the US will release their headline PPI data with the month-over-month increase forecasted to slow from 1.0% (both the headline and core) in July to around half as much in August.

EUR

The AUDEUR also sitting at similar levels seen at this time yesterday despite the early increase. European markets ending the day with mixed results with the FTSE underperforming to lose -1.0% on the day while the IBEX closed down -0.4%. The real show for the day was supposed to be the ECB’s Monetary Policy Statement and Press Conference, however currency markets were left disappointed. As widely anticipated, the ECB left its rates unchanged, with the main refinancing rate 0.00% despite ongoing inflationary pressures on the Eurozone. ECB President Christine Lagarde began by saying that the EU economy was largely re-opened and would likely return to pre-crisis levels by the end of the year though the global spread of the delta strain remained a concern, but further comments suggesting the ECB had recalibrated stimulus and that the bond-buying-program (PEPP) would be discussed fully in the December weakened the EUR later in the session.

GBP

The AUDGBP was the weakest of the majors with the Pound the standout performer of the day, trading at 0.5320 this morning. The Pound strength came from upbeat market sentiment and hawkish comments from BoE’s Governor Andrew Bailey. Yesterday he indicated that he thought the minimum criteria for monetary tightening in the UK had been met, and that it is reasonable to expect interest rates will rise soon. The comments did very little to impact market expectations that currently see monetary tightening starting around mid-2022. At 4pm this afternoon there will be a dump of economic data released in the UK including GDP numbers which could drive Pound movements into the weekend.

NZD

The AUDNZD is even if not marginally weaker this morning, trading at 1.0368 at time of writing. The Kiwi Dollar has mostly been taking impetus from Europe and North America with little macroeconomic data out of New Zealand. There has been some optimism as Prime Minister Jacinda Ardern described the case numbers as "solid progress" as New Zealand attempts to eliminate its Delta outbreak. New Zealand's COVID-19 outbreak lessened again on Thursday with 13 new cases, down from 15 on Wednesday and 21 on Tuesday. All of the recent cases have been found in Auckland, which remains in a harsh lockdown.