Softer Commodities Undermining AUD
AUD
The Aussie rally last week continues to run out of steam this morning, opening down against most majors since yesterday, off the back of a turn in global risk sentiment. Weaker commodities and Asian equities also chipped away at AUD strength with Iron Ore down -0.3%, Copper down 1.3% and Silver down 0.1% and Gold flat. The ASX was down 0.2%, Shanghai Comp down 0.4%, Hang Seng down 1.87%. The CB leading index m/m for Australia’s September printed last night at -0.2% versus last months gain 0.2%. Key takeaways on their analysis being “Increased weaknesses in global growth and restrictive monetary policies may undermine the economic rebound from the pandemic-induced recession. Despite dimming prospects for global growth, The Conference Board maintains its forecasts for year-over-year real GDP growth in Australia at 4.0 percent in 2022 and 2.4 percent in 2023.” Fairly quiet week in terms of economic data in Australia, Governor Lowe is speaking tonight, delivering a speech entitled “Price Stability, the Supply Side, and Prosperity”, no doubt markets will be listening closely for clues on the next interest rate announcement – with markets currently pricing in only 17bps worth of a rate hike at the December meeting. Tomorrow we also have Flash Manufacturing PMI and Flash Services PMI.
USD
We open up at 0.6603 this morning against the Greenback, with risk sentiment chipping away at gains made over the past week. Brent crude oil has dropped to US$83.24 per barrel, its lowest price since January this year. The oil selloff accelerated following the announcement that Saudi Arabia and other OPEC oil producers are considering an output increase. If this sharp drop holds this could help ease inflationary pressures for both business and families. US equities were down slightly with the S&P500 -0.4%, NASDAQ down -1% and Down Jones flat. Plenty of data out for the US in the coming week with the Richmond Manufacturing Index and multiple FOMC members speaking tomorrow. Durable Goods Orders are printing in the early hours of Wednesday currently priced in at a 0.4% increase. Flash Services PMI and Flash Manufacturing PMIs are also printing Thursday morning currently pegged at 48 and 50 respectively. Also, the FOMC meeting minutes will be released, giving further insight into the logic behind the last interest rate increase. There is also a bank holiday for the US on Friday as they enjoy their Thanksgiving weekend.
EUR
The AUD opens down against the Euro this morning at 0.6447. German PPI m/m printed last night, reporting prices of industrial goods paid by producers dropped 4.2% from September to October after energy costs crashed. “This was the first month-on-month decrease since May 2020,” the German statistics office reported on Monday. “Energy prices fell by an average 10.4%, which was mainly caused by the decrease of electricity and natural gas prices." This is a welcome change from the last few reports that saw a 2.3% increase in September and a massive 7.9% increase for August. This may indicate a slowing of inflation in the Eurozone’s largest economy. A busy week in the economic calendar for the Eurozone, with the Current Account (pegged at a drop to -20.3B), and Consumer Confidence (predicted to improve by 2 point to -26). There is also French, German, and overall Eurozone Flash Services PMI and Flash Manufacturing PMI printing tomorrow. The German ifo Business Climate Index is printing on Thursday, currently predicted at 85, and increase from last month’s 84.3. Thursday also sees the ECB Monetary Policy Meeting Minutes being released, more opportunity to markets to glean insights into Europe’s Central Bank’s outlook on the current economic situation.
GBP
The Aussie is down against the Pound Sterling this morning, opening at 0.5569, due to the global risk factors that has nudged the Aussie down against all majors. The UK had a fairly light start to the week in terms of data. British Prime Minister Rishi Sunak spoke during the Confederation of British Industry's annual dinner in London, saying the UK is not prepared to align itself with EU laws as part of their post-Brexit relationship, pushing back against reports his government is exploring the potential for Switzerland-style ties with the bloc. Under my leadership the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws,” Sunak said. Director-General of the CBI Tony Danker called on Sunak to loosen the regulation around immigration due to a skill shortage in the UK, saying “We’ve got an immigration system that’s far too nervous about bringing in the skills we need.” He continued “We don't have enough Brits to go round for the vacancies that exist, and there's a skills mismatch in any case." Later this week for the UK we have Flash Manufacturing and Flash Services PMI, predicted a 45.7 and 48 respectively. We also have the CBI Industrial Order Expectations on Thursday currently pegged at -9 versus last months -4.
NZD
The AUD opens down against its Antipodean counterpart this morning at 1.0823. The markets eyes are on New Zealand tomorrow as the RBNZ announces their Official Cash Rate. 15 out of 21 economics surveyed by Bloomberg believe that the RBNZ will raise rates by 75bps. This would be the biggest hike since the RBNZ introduced the OCR in 1999 and take the benchmark to its highest level since 2008. Stronger-than-expected inflation and near-record low unemployment make the case for the RBNZ to step up the pace of tightening after five straight 50-point hikes. Yesterday, Credit Card Spending y/y printed at 24.8%, versus last months 34%. The Trade Balance missed hugely coming in at -2129M versus the expected -1715M.