RBA Penciled in for 50 Basis Bps

AUD

The Aussie dollar comes out of the long weekend mixed against the majors re-entering what can be described as quite volatile market conditions over the last several days. Asian equities finished Monday’s session largely in the red, with the Nikkei outperforming its peers +1.1%. The ASX was -0.3% on the close after briefly touching a 3-month low. Out of China before the long weekend we observed the release of the monthly Manufacturing PMI printing stronger than expected at 50.1 above expectations of a flat 49.4 (same as last release). Meanwhile both Non-Manufacturing PMI and the Caixin Manufacturing PMI missed the mark, printing 50.6 against expected 52.6 and 48.1 against forecast 49.7 respectively. A quiet one on both the Aussie and Chinese Macro-economic calendars over the last 24 hours, in observance of Labor Day long weekend over here and the beginning of Golden Week national holiday over in China set to wrap up on Friday October 7th. This will keep the Chinese region relatively quiet over the next 4 days in terms of Macroeconomic news. With that said locally we did observe the MI Inflation Gauge m/m Monday morning printing a positive 0.5 over last month’s -0.5 figure. Looking ahead today’s big-ticket Item will be our much-anticipated RBA policy decision meeting, set for release at 2:30 this afternoon. Markets predict another hike from 25 to 50 basis points despite Governor Lowe making noise about the potential for a slowing in the pace of tightening. A more likely 50-point hike would bring the cash rate to 2.85%. 
 

USD

The Aussie Dollar has found a resurgence against the Greenback over the long weekend, bounding off Saturdays lows of 0.6391 to reclaiming the .65 handle, currently trading at 0.6512 at time of writing, slightly up from last report. Wall Street was weighed at the start of the week before rebounding overnight with the S&P 500 leading the way at +2.8%, while the Dow Jones and the NASDAQ gaining +2.7% and +2.3% respectively. Friday night we observed the Core PCE Price Index m/m printing 0.6% stronger than expectations of 0.5% and a previous of 0.0%. Following this we saw the Revised UoM Consumer Sentiment missing the mark with a print of 58.6 with expectations of a flat 59.5, same as previous, all while UoM Inflation Expectations were revised from 4.6% to 4.7%. The AUDUSD snapped a two-day losing streak as a result of a combination of factors exerting some downward pressure on the USD, which in turn, has offered some support to the AUD. ISM Manufacturing PMI missed the Mark coming in at 50.9 against a predicted 52.5 and previous of 52.8. Declining US Treasury bond yields put the USD on the defensive offered some relief for the risk- sensitive Aussie and other similar currencies against the Big Dollar. the benchmark 10-year US Treasury note moves away from a 12-year high touched last Wednesday. Looking ahead will see the release of JOLTS Job Openings early tomorrow morning

EUR

A similar theme of volatility for the AUD/EUR pair reaching a low of 0.6517 Saturday night to have rebounded back into the 66s currently trading at 0.6620 at time of writing. European Equities closed in the Green, with the day DAX gaining +0.8%, and the CAC following close behind, up +0.6%. A slew of Data from the Eurozone, much of which was quite positive, which was likely the contributor for the downward pressure on the AUDEUR. German Unemployment Change was notably better than expected printing 14K unemployed, 6K less than expectations and 12K less than the previous month. Italian Monthly Unemployment Rate followed the same trend falling to 7.8%, 0.1% less than expectations and previous. CPI Flash Estimate y/y came in at a mammoth 10.0% against a forecast of 9.7% whilst the Core reading was also positive at 4.8% against expected 4.7% and 4.3% previous. Eurozone overall Unemployment Rate remained Flat at 6.6%. Final Manufacturing PMIs for Europe were also released, with no significant readings. Of focus tonight will be President Lagarde speaking at an event organised by the Central Bank of Cyrpus.

GBP

The Aussie Dollar trades significantly lower against the Pound Sterling as the UK Government completes the backflip on tax cuts, trading at 0.5752 at time of writing. The FTSE was up +0.2% yet little softer than its contemporaries. There are a few major UK developments to note. Firstly, the final look at Q2 GDP was better than the first. Rather than contract by 0.1% as forecast, the economy expanded by 0.2%, offering a much-needed boon to the GBP. Consumption edged higher instead of slipping, and the drag from government spending was not as great as initially thought. Monday’s singular data point was the Final Manufacturing PMI, which printed .1 short of 48.5 predictions offering little significant impact. As mentioned earlier, reports suggest that the UK government was planning to reverse its scheme to scrap the 45% rate of income tax for the highest earners to provide a boost to the British pound. When UK Finance Minister Kwasi Kwarteng confirmed that they will not go ahead with that plan, it triggered market action and caused GBP/USD to retreat from its highs. In response, traders have revised their BoE bets, pricing in less than 125bps of hikes by Nov. The 10-year UK Treasury gilt yield stays relatively quiet near 4% following the sharp decline witnessed following the Bank of England's intervention in the gilt market last week. Monday Afternoon BOE Member Mann hit the wires claiming although UK inflation expectations have not been de-anchored, she is still concerned about a medium-term upward drift. As for today it will be a quiet one from the region with no additional data to be seen.

NZD

The AUDNZD is up since last report currently trading at 1.1386 at time of writing, yet having fallen 55 basis points since Monday mornings highs of 1.1441. The only data release for the region today was the NZIER Business Confidence. which came in at -42 against a previous of -65. Tomorrow we will see more significant data as the RBNZ gathers once more to deliver its eighth consecutive rise in the official cash rate. Another 50-basis point rise would place them at a Cash Rate of 3.50%, the highest level since mid-2015.