RBNZ Raise OCR by 50 bps

AUD

The AUD continuing the trend of moving in opposite directions against the major trading currencies, with mixed outcomes becoming the norm in such volatile markets. Asian equities finished Wednesday’s session higher with the Hang Seng +5.7%, its best session since March. The ASX was +1.7% on the close, in reaction to better jobs data out of the US, with markets looking for signs interest rates are beginning to peak. Commodities were generally higher with Gold and Copper putting on +0.5% and +1.7% respectively, whilst Iron Ore lost -0.1%. In less noteworthy data, Australian Retail Sales rose 0.6% in August, the eighth consecutive rise driven by increases in food related industries - bang on expectations. No data from China as they continue through Golden Week, the week-long national holiday. Less notable data again today with only local trade balance tipped for release at 11:30am.
 

USD

The AUD/USD trading slightly lower this morning as the pair becomes more familiar with the 0.64 level, trading as low as 0.6416 before returning to trade at 0.6489 currently. A late recovery in risk sentiment wasn’t enough to keep Wall St in positive territory overnight. The S&P 500 and the Dow Jones closed -0.3%, while the NASDAQ finished the session -0.2%.  US yields advanced with the 10-year gaining 11bps while crude oil was trading +1.5% higher at $87.80 a barrel. In US data, the ADP Employment report for September showed 208k jobs were added to the US economy, up from a positively revised 185k and slightly above expectations of 200k. ISM Services Index for September printed at 56.7, down from 56.9 though better than expectations of 56.0. Attention has now shifted to tomorrow mornings US employment report with traders looking for confirmation of the soft JOLT’s and ISM numbers earlier this week. Additionally, we’ll hear from members Waller and Mester tomorrow as well.
 

EUR

The AUD/EUR reclaimed some of this weeks earlier losses to trade at 0.6563 at time of writing. European equities started and finished in the red, unable to pare any losses, the DAX losing -1.2% and the CAC -0.9%. The Eurozone reported that business activity slowed, as shown by the S&P Global PMI survey, further cementing the case of the EU’s getting into a recession as a stagflation scenario looms. Services activity weakened in Germany, Italy, and Spain, except for France, though it grew by less than estimated. More lower tier data penciled in for release this evening with both French and Spanish 10-y Bond Auctions. Of main focus will be the minutes from the last ECB monetary policy meeting, though markets have already heard the opinions of many ECB members since then.
 

GBP

The AUD/GBP only had a short stint in the 0.56s as it climbed back up to trade at 0.5730 as the Britts had their credit rating downgraded this morning. UK companies suffered the sharpest decline in activity since the lockdowns of January 2021, with the September UK Composite PMI index falling to 49.1 from 49.6 in August. However, this print was revised up slightly from the flash reading of 48.4. The UK’s credit outlook was lowered to negative from stable by Fitch Ratings, which cited risk the government’s new growth plan could increase the nation’s fiscal deficit. Britain’s most radical package of tax cuts since 1972, combined with plans for large-scale borrowing, sent UK markets into a tailspin last week, with the Pound hitting the lowest-ever level against the Greenback while borrowing costs soared. The Bank of England stepped in to stave off an imminent crash in the gilt market by pledging unlimited purchases of long-dated bonds. Only data tonight will be the Construction PMI which shouldn’t move markets.
 

NZD

The AUD/NZD lost out as the RBNZ raised interest rates for the fifth time by 50 bps, the pair trading at 1.1302 this morning. The Reserve Bank of New Zealand (RBNZ) hiked the Official Cash Rate (OCR) by 50 bps to 3.50%. Yesterday’s Statement makes clear the RBNZ’s job is far from done, with the bank reiterating continuing to hike ‘at pace’ given the demand for goods continues to exceed supply, with core inflation too high and a very tight labour market. A 75 bps hike was considered however voting members decided to remain patient and consider a larger move at the next meeting in November.