US Data Disappoints, Fuelling Risk Reversal
AUD
AUD traded weakly into the weekend, red across the board as a slew of poor US economic data on Friday renewed fears of a more protracted global economic recovery. Local economic data was absent, but Asian equities tracked lower, with markets in China and Japan losing ground while the ASX also fell by 1.1%. In Commodities Gold fell 0.3% while Iron Ore fell by 0.6%. Out of China on Friday we saw USD-Denominated Trade Balance print an actual of 94.5B, significantly above projected 73.9B and previous 71.7B Chinese Trade Balance printed at 605B, up against predicted 454B and the previous 461B. The Chinese data continues early this afternoon in the form of GDP q/y data, with a projection of 3.3% and a previous of 4.9%. A weak print is widely expected, given the power rationing, COVID outbreak, and the slumping Chinese property sector. Alongside this we will also get the Retail Sales yearly data with a forecast of 3.8% similar to the 3.9% of last year this time. Looking ahead, most of the relevant Aussie data to keep an eye out for will begin to roll in on Thursday with the release of Employment Change and Unemployment Rate.
USD
The Aussie is currently at 0.7215 against the Big Dollar, losing most of the gains it had made last week as a result of risk aversion driving the greenback higher. The risk-related aspect of poor US data was the focus of markets, rather than the specific US-centric implications of the poor results, so the USD's safe-haven characteristics enabled it to outperform in the risk-heavy trading environment. The data itself was as follows; Core PPI m/m at 0.5% on par with projections and slightly below previous 0.7%. PPI m/m data was down to 0.2% against a more conservative projection of 0.4% against previous 0.8%. Unemployment Claims saw 230K worse than projected 199K and previous 207K. Core Retail Sales m/m worse than expectations at -2.3% with projections at 0.2% and previous 0.1%. Also Industrial Production m/m down at -0.1%, Prelim UoM Consumer Sentiment fairing similarly lower at 68.8. As one would expect, equities were down as traders trimmed risk positions, the DOW JONES down 0.6%, while the S&P 500 rose slightly by 0.1%, with the NASDAQ being the exception to the rule with 0.6% gains. The US is on holiday today and it's a quieter week ahead on the data front.
EUR
The AUDEUR pair saw the Aussie losing ground over the weekend as risk aversion took hold, currently trading at 0.6317. Out of Europe we saw quite average CPI and Budget balance data out of France, with trade balance data down 1.3B compared to expected gain of 1.5B. On Saturday we had Lagarde at a virtual ceremony marking the change of office of the President of the Bundesbank (which is the German central bank). European equities opened lower with the Eurostoxx in particular trading more than 1% lower. A quieter week of data ahead with ZEW Economic Sentiment and the German ZEW Economic Sentiment data on Tuesday. More relevant to currencies will likely be potential Covid based restrictions as Europe continues to struggle with labor and supply shortages.
GBP
Similarly story here with the Aussie down to 0.5272, surrendering Thursday's foothold above the 53 handle . UK data on Friday was much better than expected, encouraging the Pound bulls and increasing the changes of a Bank of England rate hike at the beginning of next month. Specifically, GDP m/m climbed by 0.9% higher than projected 0.4% and previous 0.2%, Similarly, Industrial Production m/m also better at 1.0% compared to forecasted 0.2% and previous -0.5%. Manufacturing Production m/m up 1.1% forecasted 0.2%, previous 0.1%. The good economic data wasn't able to save UK Equities from a broader risk sell-off; the FTSE suffered a little losing 0.3%. Looking forward we will see quite a bit of UK data; the highlights being Wednesday's CPI data followed by BoE Gov Bailey's speech which may offer clues as to rate hike timings.
NZD
AUDNZD pair losing ground and retracing to 1.0597 at time of writing. AUD's rally over the last month now seems to be running out of steam, volatility in this pair is pretty limited. There is low-impact data interspersed throughout the week ahead, however interest rate markets are likely to drive this pair in the short-medium term.