Currency Markets Sluggish to Start the Week
AUD
It was a quiet session yesterday and that continued overnight as the AUD was trading within tight ranges against the majors. It’s been a boring start to the week as currency markets yawned at the lack of notable macroeconomic data. US Equities, which look to be quietly losing their strong correlation with the AUD, were marginally stronger with the Dow Jones +0.8%, the S&P 500 up +0.2% whilst the Nasdaq is down -0.1%. Commodities were largely unmoved, though Iron Ore has managed to survive the recent Chinese demand slump, gaining +0.8%. It’s a busier start to the day domestically, the RBA’s Governor Lowe will speak at the annual Anika Foundation event at 12:45pm, which will include a Q&A session. Based off Lowe’s post-Board meeting statement last Tuesday, the theme of the speech is expected to be “delayed but not derailed”. Lowe is likely to emphasise that the big hit to the economy in Q3 is likely to be temporary but that the recovery may take a little longer this time than after previous extended lockdowns.
USD
The AUDUSD trading sideways and finding some familiarity, sitting at 0.7368 this morning. The lacklustre conditions can be partially attributed to the Federal Reserve’s blackout period this week ahead of next week's FOMC meeting. Black out periods limit FOMC participants from speaking publicly about monetary policy so as to avoid any volatility and maintain the due process of the meetings. What will be the main event of the day is the US’s CPI data for August released later this evening, and could set the tone for markets ahead of next week’s Federal Reserve meeting, particularly if it is hotter than expected. CPI is expected to have risen +0.4% in August m/m, though recent Inflation data has been coming in better than expected, raising concerns it may be more persistent than Fed officials believe it to be and difficult to continue to call transitory.
EUR
The AUDEUR also trading at similar levels seen yesterday trading at 0.6237 at time of writing. European Equity Indices have been on a roll recently and the IBEX led the way with +1.4% gains at the closing bell while the MIB gained +0.9% and FTSE and DAX closed around +0.6% higher. The CAC was a relative underperformer with +0.2% gains on the day. On a quiet night on the data front Italian unemployment dipped to 9.8% in Q2, beating the forecast of 10%.
GBP
The AUDGBP following the same trend as the other majors with little to no movement in markets. In the UK economic docket heats up this evening, the Claimant Count Change is expected to come at -71K, while the ILO Unemployment Rate is forecasted at 4.6%. If the reading is strong, it could give a push to the British pound. Last week, BoE’s Governor Andrew Bailey said that MPC members were split between those who felt that conditions for a rate hike had been met and those who did not.
NZD
The AUDNZD capping the off the bunch with… you guessed it, another reserved session as it trades at similar levels, sitting at 1.0355 this morning. Some nerves were calmed as Jacinda Ardern said she did not intend to continue to use the lockdown system in the long-term fight against Covid. She pointed out that New Zealand had fewer days where people had been given stay-at-home orders than most comparable countries. NZ quarterly GDP data on Thursday this week will be the data highlight.