Quiet Day for Data, Central Bank Chiefs in Action Tonight
AUD
The AUD had a mixed session of trade overnight as US Equities took a dive and commodities soured. Asian Equities were mostly higher yesterday with the Hang Seng outperforming 1.2%, The Shanghai Comp gained 0.5% while the Nikkei posted a modest loss of -0.2%, however the ASX fell 1.47% on Tuesday led by the worst day in a year for healthcare stocks in a broad decline across the local market. Commodities were down across the board with Iron Ore, Gold, Silver and Copper all posting losses overnight. In the main event, Retail Sales figures yesterday had showed that Covid lockdowns have continued to weigh heavily on Australia’s retailers as sales dropped for a third month straight. Retail turnover fell 1.7 per cent to $29.3 billion in August, following a 2.7 per cent slump in July and a 1.8 per cent slide in June. The $360 billion retail sector accounts for around 18 per cent of Australia's economic output and further weakness is expected this month with Sydney, Melbourne and Canberra all locked down. Little data on the docket today with investors likely scanning the wires for any new information from Evergrande and its bond coupon repayments.
USD
The AUDUSD reversed the course on Tuesday, falling from highs of .7311, trading at a rate of 0.7243 this morning. US Equities fell sharply overnight as Nasdaq led the way and fell 2.7%, the S&P 500 fell 1.9% and the Dow Jones was down 1.5%. US 10-Year treasury yields propelled to the highest level since mid-June, now sitting at 1.537% while oil was 0.9% lower but still hovering around recent highs driven by the ongoing supply chain crunch in Europe. In early data, the US saw September Consumer Confidence fall to 109.3, down from 115.2 and below expectations of 115.0 with moderations in the Present Situation and Expectations sub-indices. Also released and the Richmond Fed Manufacturing Index for September fell to -3, down from +9 and well below expectations of +10. A relatively quiet day on the data front although there is still potential for some market volatility with sentiment souring. The looming debt ceiling negotiations in the US are also expected to provide investor opportunities.
EUR
The AUDEUR pair slid from highs of 0.6249 overnight to trade at a rate of 0.6196 at the time of writing. European Equities continued to digest the fallout of the German election with the CAC shedding -2.2% and the DAX lost -2.1%. On the data front, German consumer confidence for October has brightened, the survey of around 2,000 Germans climbed to 0.3 point from a revised -1.1 points for September. During the European session, some ECB members crossed the wires. Francois Villeroy, Head of the Bank of France and Governing Council member, said that “There’s no doubt that inflation will be below 2% by 2023.” ECB President Christine Lagarde said that we would only react to improvements in headline inflation that we are confident are durable. She added that “we are monitoring developments carefully but, for now, we see no signs that this increase in inflation is becoming broad-based across the economy.” Tonight, in an ECB forum panel, the ECB President Lagarde will join fellow central bank chiefs including BoE’s Andrew Bailey and Fed’s Jerome Powell.
GBP
The AUDGBP pair bucked the trend to make a gain overnight, trading at a rate of 0.5347 at the time of writing. The London Benchmark FTSE 100 posted a modest loss of -0.5%. The British 10-year gilt yields also climbed and up to their highest since the pandemic started above 1%. However, there are major worries about how gas and petrol shortages could impact the British economy as prices soar in the energy sector. The UK has been facing a fuel distribution issue for a number of days. Some petrol stations have now completely run dry across the UK due to a post-Brexit shortage of truckers that have triggered panic buying. The risks flow over to the covid situation as this has raised fears that hospitals would be left without doctors and nurses. A lack of data locally will see investors eyeing off this evening’s forum panel with the BoE Governor Bailey, Fed Jerome Powell and ECB’s Legarde.
NZD
The AUDNZD followed suit to make a gain overnight, trading at a rate of 1.04057 this morning, a fresh 20-day high. The overall US dollar strength, fuelled by higher US yields on hopes that the Fed Reserve will start tapering its bond buying program, has weighed on the NZD. Furthermore, the negative market mood surrounding the debt crisis at the Evergrande Group have increased pressure on the risk-sensitive NZD. It’s a lighter week for Kiwi data, tomorrows Business Confidence the only data of note.