Employment Numbers Due at 11.30am

AUD

AUD fared well overnight supported by improved risk appetite, however the first test of 2022 will arrive at 11.30am this morning with the local Employment Report for December. Asian equities were down on Wednesday with the Hang Sang outperforming its peers up 0.1%. The ASX finished the session down 1%, led by tech shares which fell 2.6%. Gold, silver, and iron ore expanded conservatively, gaining 0.1%, 0.1%, and 0.6% respectively. Copper outperformed its precious metal peers, advancing 1.7%. To the big data due at 11.30, remember employment bounced back very sharply in November and recouped all of the lockdown-related losses at the national level. However, employment in NSW, VIC and the ACT remained well below recent highs. Also, the share of the working age population in November with an attachment to a job was higher compared to what was actually reported as employed, particularly in NSW and VIC. So these factors could point to further retracement of job losses in these regions in December which should support strong gains in overall employment. Employment reports are notoriously fickle, so expect volatility late morning.

USD

Currency markets were relatively subdued but the AUDUSD did manage a high of 0.7239 before settling at around 0.7225. The States with a number of better than expected minor data releases earlier this morning, new Building Permits showed a result of $1.87m (expected $1.71m) and Housing Starts data coming out with a result of $1.70m (expected $1.65m). Another soft session for U.S equities overnight with all three indices trading marginally in negative territory.  U.S yields edged fractionally lower while oil continued to push higher with further gains of 1.2%. Looking ahead, a significant day of data to be released tomorrow for the U.S., with the Philly Fed Manufacturing Index, Unemployment Claims, Existing Home Sales, and Crude Oil Inventories all being due out before 3am.

EUR

AUDEUR opens slightly higher this morning at 0.6354, having at one point reached two week highs of 0.6380 overnight. European equities opened lower with the Euro Stoxx 50 down 0.6%. Germany’s 10-year yield turned positive for the first time since 2019, Germany's Economic Sentiment also showed a marked improvement overnight, printing at 51.7 which was way above expectations of 32.1. Economic Sentiment for the EZ as a whole also smashed expectations, printing at 49.4 vs 29.2 expected. This increase in sentiment across Europe seems yet to be shared by policy makers, ECB Lagarde front and centre. Due out this evening from Europe, Final CPI y/y and European Central Bank Monetary Policy Meeting Accounts.

GBP

AUDGBP opens slightly higher this morning at 0.5296 having briefly traded above 0.53 in the early hours. UK equities were soft with the FTSE100 losing 0.5%, however a raft of good economic data was the focus of markets. Inflation jumped to the highest annual rate in 30 years, up 5.4% in December, from 5.1% in November. UK core inflation rose to 4.2% y/y in December above an expected 3.9%. The good data continues to build pressure for a February rate hike from the BoE, backed up by an 8bp jump in the UK 10-year yield to 1.3%. No data due from the UK tonight, however worth keeping an eye on the politics, with 11 Tory MPs giving letters of no confidence in PM Boris Johnson overnight.

NZD

The AUDNZD continues to trade either side of the 1.06 handle, opening this morning on the high side at 1.0624. IN NZ the Food Price Index was released at 8:45am this morning, with an improvement over previous data of -0.6%, coming in at 0.6%, being a 1.2% improvement. Today's local Employment Report has the potential to wake this pair out of its slumber.