Fed Chair Powell Remains Vague on Tightening Timeline
AUD
The AUD is trading higher across the board overnight after some murkier than expected comments from central bankers in Europe and North America. Some extra positivity for the Aussie came from stronger Retail Sales data as Australian household spending jumped in November with a combination of easing lockdowns and pre-Christmas purchases boosting outlays, suggesting the broader economy is likely to have rebounded solidly in the final three months of 2021. Retail sales soared to +7.3% in the month after advancing +4.9% in October, easily outpacing expectations of a 3.6% gain. Commodities were also boosting the commodity currencies, with Copper gaining +1.7%, whilst Iron Ore put on +1.0%. It continues to be a light calendar on the domestic data-front, with no notable data releases for the rest of the week, as currency markets will look to the US for impetus this week.
USD
The AUDUSD reclaiming the 0.72 mark as the Aussie surged back overnight, currently trading 0.7210 this morning. The Aussie was boosted after testimony from Fed Reserve Chair Powell was unclear and provided no new details on the path of US monetary, reiterating that no decision on timing had been made regarding balance sheet reduction. The Greenback was softer after the news, highlighted by the USD Index, the DXY down -0.4%. Perhaps also injecting some confidence into markets, Wall St finally managed to post some gains after 5 consecutive sessions of losses, the NASDAQ posted +1.3%, while the S&P 500 and the Dow Jones were +0.8% and +0.5% respectively. Other Fed Speakers were hawkish but couldn’t shift the market's focus on Powell, with both George and Mester highlighting that “the current very easy monetary policy stance was out of sync with the economic outlook”. Looking ahead to tonight will see US inflation reports posted, a highlight of the week. Forecasters are expecting one of the highest readings for 2021 with Core and headline inflation to print at 5.4% and 7.1%, respectively.
EUR
The AUDEUR taking some positive strides to move up to 0.6343 this morning. European equities were broadly stronger with both the FTSE and the DAX gaining +0.6% and +1.1% respectively. The Aussie benefitted whilst the Euro was weaker after some sheepish comments from ECB member Phillip Lane. ECB chief economist Lane was quoted saying “inflation will fall this year, and that it will go below our 2 per cent target in 2023 and 2024.” While the 5% December inflation number is “unusually high”, Lane said that’s dominated by the 26% rise in energy prices last year. He added, “we do not see behaviour that would suggest inflation will remain above our target into the medium term”, leading to question marks over the likelihood of a potential rate hike. Still a relatively quiet front for data releases, health status being a heavy influence on markets as the WHO reported that more than 50% of Europe’s population may be infected with the Omicron strain within weeks at current rates of transmission.
GBP
The AUDGBP the worst of the bunch only taking minor gains to move up to 0.5290 this morning. WIth a lack of macro-economic data, focus remains on Covid-19 though some positivity for markets as former Bank of England official Tony Yates, has backed UK PM Boris Johnson’s decision to ride out the Omicron wave of Covid-19 infections with minimal restrictions. Radio-silence from the Britts will continue until some less-notable data trickles through starting next week, with some CPI data the main card on Wednesday.
NZD
The AUDNZD pushed higher overnight to trade at 1.0620, with the current range for trade that we’ve seen from Christmas until now is still the highest since mid-July. Still no notable data from the Kiwis as the macroeconomic calendar is bare for now. NZ has fared comparatively well on the Covid front with just 23 cases reported in the past 24 hours, though concerns have been noted about the obvious potential of a breakout.