AUD Enjoys Improvement in Risk Sentiment
AUD
The AUD is mixed against the majors as risk appetite rebounded from its earlier slump this week. The market sentiment improved substantially, following news that Evergrande, the Chinese property giant, will likely be restructured to avoid default. An onshore arm of the distressed developer said Wednesday it negotiated a Yuan bond interest payment, reducing concerns over a potential crash. US and Asian Equity Indices enjoyed the benefits of the markets increased penchant for risk, with the Dow Jones, S&P 500, and Nasdaq seeing gains of +1.5%, +1.2%, and +1.0% respectively. The ASX was 1% higher on Thursday with energy and financial stocks the main drivers. Yesterday’s Australian PMIs for September pointed to a mixed picture. The Manufacturing PMI accelerated to 57.3, up from 52.0 beforehand. However, business activity declined for a third straight month, as the Services PMI came in at 44.9, up slightly from 42.9. Commodity markets were having a snooze as Gold traded flat on the day whilst Iron Ore consolidated, a tad lower by -0.1%. Australia’s domestic data docket is empty today and with another quiet week ahead, AUD will be guided by risk sentiment, commodity prices and US Fed chatter around tapering.
USD
The AUDUSD rebounding and just sneaking higher into the relative comfort of the 0.73 handle, trading at 0.7301 this morning. The greenback was on the back foot as most of its major rivals relished the improved market sentiment signalled by -0.48% loss on the US Dollar index, the DXY. The US data overnight was generally weak, Weekly Unemployment Claims data missed expectations with initial claims rising from 335k to 351k to come in worse than forecasts of 320k while continuing claims rose to 2.845M from 2.714M, higher than forecasts of 2.600M. Also released was Chicago Fed National Activity Index, designed to gauge overall economic activity and related inflationary pressure. For August it fell from 0.75 to 0.29, missing expectations of 0.50. US Markit Manufacturing PMI for September printed 60.5, down from 61.1 and below expectations of 61.5 while Services PMI came in at 54.4, down from 55.1 and below expectations of 54.9. The combined result saw the Composite PMI fall to 54.5 from 55.4. The combination of improved risk sentiment and weaker US data had the USD in retreat. Closing out the week, Fed Chair Powell is due to speak tonight, with his comments always scrutinised for clues on changes to monetary policy.
EUR
The AUDEUR pair also seeing upside as it resumes its position in the 0.62s, trading at 0.6216 at time of writing. European Equities joined in on the fun with +1.0% type gains for the CAC, DAX and IBEX while the MIB closed +1.4% higher. It was a busy session in European data, with a variety of PMIs from the region released, with the three major sets of data all proving to be weaker than expected. France’s manufacturing came in at 55.2 (57.0 expected) with services at 56.0 (56.1 expected). Germany (the regions strongest economy) saw manufacturing at 58.5 (61.4 expected) with services at 56.0 (60.3 expected). Eurozone manufacturing printed at 58.7 (60.3 expected) with services at 56.3 (58.5 expected). The manufacturing and production sectors slumped primarily due to a shortage in supply which led to bottlenecks while demand remains high. European focus will now move to German elections over the weekend, with it being of key importance since outgoing Chancellor Angela Merkel had built a strong foundation with foreign peers (united foreign policy) which has made Germany an attractive investment alternative in the business space.
GBP
The AUDGBP Is marginally higher on the day even after some hawkish commentary from BoE meetings, trading at 0.5318 this morning. It was widely expected that the Bank of England would keep monetary policy on hold, and this held true. However the hawkish tone came from the Monetary Policy Committee, which noted that the case for tightening had increased since August, and that a rate hike before they conclude QE in December can't be ruled out. This is interesting because it has generally been expected that a conclusion to QE would occur as a pre-cursor to interest rate hikes, not the other way around. Markets are now expecting to look for the MPC to hike rates in August and November 2022, however this could be moved forward if BoE continues a similar train of commentary to last night.
NZD
AUDNZD trading lower to sit at 1.0324 this morning as both currencies benefitting from upbeat market sentiment. This morning's New Zealand Trade Balance dropped significantly, showing a $2.1B deficit compared to only a 397mio previous result. This was driven by a large drop in Exports whilst Imports for the month increased. Given the lack of major data/events out of NZ, markets will be looking for fresh impetus from the ongoing relative health situations and easing of related economic restrictions.