Aussie GDP Surprises to the Upside

AUD

The AUD continues to find some momentum on its north-bound run off the back of some better-than-expected local GDP numbers yesterday, as well as some Greenback weakness (see more in USD section). US Equity markets were stable with only the NASDAQ gaining +0.4%, while the Dow Jones and the S&P 500 were flat. Iron Ore was a standout performer in commodities as they saw +1.4% gains as Gold remained flat. The AUD started yesterday morning off on the right foot, following the release of the better-than-expected Australian GDP report. Data from the Australian Bureau of Statistics (ABS) showed that the GDP expanded +0.7% in the second quarter against +0.5% expected. Treasurer Josh Frydenberg said GDP beat "all market expectations" and was "ahead of what was forecast at the Federal Budget". The positive GDP growth likely means Australia can avoid a technical recession if the economy opens up in Q4, with the current quarter being a lost cause due to lockdowns and surely a lock-on for a contractionary number (markets estimating -4.5% currently). It’s a quieter day domestically today with less interest in some second-tier data domestically, with Retail Sales tomorrow morning gathering interest.

USD

The AUDUSD finding a bit of strength as data out of the US was mixed overnight, currently trading at 0.7367. The Greenback was under strong selling pressure after the release of some poor US employment-related data. The ADP Non-Farms Employment Change survey showed that the private sector added 374K new jobs in August, well shy of the 613K expected. Later on, the ISM Manufacturing PMI came in better than expected at 59.9, although the employment sub-component contracted to 49 from 52.9. Both figures hint at a weaker official Nonfarm Payroll report later this week, which in turn will justify US Federal Reserve Head Jerome Powell’s dovish stance on tapering. Also weighing on the USD is the Covid Delta situation, as the US hit the 100,000 hospitalisations mark over the last week for the first time since the winter peak last year. Looking forward, there’ll be some Fed talk from members Bostic and Daly later tonight as well as all-important employment data tomorrow night.

EUR

The AUDEUR also making some positive moves as it trades 0.6221 this morning. European equities opened overwhelmingly positive, with the FTSE 100 jumping 0.9% to a two-week high. These gains have supported the longest streak of monthly gains in European equities since 2013. There was some bullish language out of the European Central Bank overnight, as ECB members Klaas Knot and Robert Holzmann signalled they would support tapering the emergency bond-buying scheme after preliminary inflation figures beat estimates. ECB’s Knot sees ‘credible perspective for inflation to return to 2%’, whilst Holzmann said that slowdown of PEPP purchases is “definitely a topic next week.” Leading credit rating agency Fitch Ratings cooled tempers by noting that they do not expect the ECB to make any changes to interest rates until 2025. A handful of Manufacturing PMIs were also released out of the Eurozone however there was little to excite as most data fell in line with expectations. Looking ahead, there’ll be some Spanish employment data out this afternoon before some finalised Service PMIs out tomorrow.

GBP

The AUDGBP is trading at the highest level since late July, sitting at 0.5349 this morning. In early UK data, house prices jumped 2.1% in August surpassing expectations of 0.1%, now around 13% higher than when the pandemic began. The morning saw the release of the manufacturing PMI numbers for August, with the UK coming in at 60.3, slightly beating the forecast of 60.1. The UK won’t publish macroeconomic figures today.

NZD

The AUDNZD also seeing the benefit of overwhelmingly positive local data overnight, sitting at 1.0426 this morning. New Zealand’s Terms of Trade Index for the second quarter (Q2) jumps to a fresh high since the quarter ended on May 2017 while rising 3.3% versus 2.5% expected and 0.1% prior. The figures increase the odds of the Reserve Bank of New Zealand’s (RBNZ) rate hike in 2021 and should have favoured the NZD, however, the recently found virus-led challenges across the ditch still pressuring the Kiwi.