Central Banks in Action This Week
AUD
The Aussie Dollar is trading higher against the majors over the weekend as vaccine enthusiasm and mixed US data bolstered the local dollar. The recent strong correlation between increasing US Equities and stronger Aussie Dollar didn’t hold true over the weekend as the Dow Jones, S&P 500 and Nasdaq sitting either side of flat trading at -0.2%, 0%, and +0.2% respectively as AUD continued its strong run. Commodities were better with Gold up +1.0%, Copper +0.7%, Silver was the biggest performer up +3.5%, however Iron Ore remained steadfast with no change. The AUD enjoying vaccination positivity the news of a deal with the UK to secure four million doses of Pfizer, doubling the nation's Pfizer supply this month. Deputy Chief Medical Officer Sonya Bennett said the extra vaccines had reinforced the vaccine rollout which should be reassuring for financial markets. This is especially key as we look forward to the RBA meeting tomorrow, though the general consensus still remains that the RBA is expected to delay its QE tapering as new cases continue to rise despite record lockdowns.
USD
The AUDUSD finding its strongest levels since mid-July, sitting at 0.7450 this morning. The US released its August Nonfarm Payrolls on late Friday night and it missed the mark by a significant amount, showing a net gain in jobs of 235K, well below the 750K of market consensus. Other details were more positive with the unemployment rate dropping from 5.4% to 5.2% as expected, while average hourly earnings +0.6% MoM and +4.3% YoY, beating expectations of +0.3% and +3.9% respectively. The overwhelmingly disappointing employment data really puts a question mark as to when the Fed will decide to taper, potentially closing the door on a September announcement. The economic activity in the US service sector continued to expand in August, albeit at a softer pace than it did in July, with the ISM Services PMI declining to 61.7 from the record-high set at 64.1. North America starts the week off with the Labour Day bank holiday, with the first data of note, the JOLTS Job Openings coming out late Wednesday night.
EUR
The AUDEUR flying to 3-week highs trading at 0.6269 this morning. There looks to be a convergence between the Central Banks as the US Fed Reserve tempers expectations about locking in a date for tapering, which has been contrasted by the European Central Bank emerging from the flanks with a hawkish narrative. While the ECB may defer a decision about reducing PEPP (Pandemic Emergency Purchase Programme) to December, the key question is how members reacts to the latest surge in inflation headline at Thursdays ECB Press Conference. Such a discussion could give a hawkish feel to the meeting, especially if it were to be followed by a reduction in the pace of the ECB’s weekly purchases.
GBP
The AUDGBP also trading at levels last seen mid-July, trading at 0.5373 to start the week. It’s been a quiet start to the week with little macro-economic data. There’s been a setback in extending any further vaccine rollout to the wider community as the UK's vaccine advisory body has refused to give the green light to vaccinating healthy children aged 12-15 years on health grounds alone. The JCVI said children were at such a low risk from the virus that jabs would offer only a marginal benefit. The UK's four chief medical officers have now been asked to have the final say, and to consider the wider impact on schools and society.
NZD
The AUDNZD sitting marginally higher to trade at a familiar 1.0415 this morning. Virus conditions are mixed as New Zealand reports no new cases during the weekend but the West and Australia don’t show promising signs. NZ Prime Minister Jacinda Ardern will announce activity restriction guidelines for the nation outside Auckland today with no cases linked to the current outbreak have so far been detected outside Auckland or Wellington. It should be a quiet week from the Kiwis with little action on the economic calendar, more likely taking direction from health conditions locally.