USD Vulnerable Ahead of Tonight's Non Farm Payrolls
AUD
The Aussie fell significantly overnight against all majors with the exception of the USD following a slew of data releases from around the world. Asian equites closed higher across the board as additional Covid measures to be released in China in the coming days, allowing positive Covid cases and close contacts to quarantine at home - China’s Stock index CSI300 being the top performer up +1.1%. The ASX finished Thursday’s session +1% with materials helping to lift it to a 7-month high, with the Shanghai and Nikkei drifting slightly higher up 0.4% and 0.9% respectively. Commodities closed slightly up with Gold, Silver and Iron closing up less than 0.2% with Copper staying strong up 1.5%. Domestic data released yesterday saw Commodity Prices gain 19.1% over the year which whilst strong, was down from the previous year's 31.6% gain. The Private Capital Expenditure q/q on the other hand missed significantly, printing at -0.6 vs 1.6% which likely contributed to the AUD’s weakness overnight as it measures the value of new capital expenditures by businesses thus suggesting a large slowdown economic activity. Looking onto data today, we have Retail Sales m/m tipped at -0.2% and RBA Gov Lowe speaking after midday.
USD
After a large batch of mixed US data releases overnight creating a volatile session, the AUD manages to hold its 7-week high opening slightly up at 0.6811. US Personal Income for October rose by 0.7% to beat estimates of 0.4% while Personal Spending printed at 0.8% as expected. Weekly jobless claims were mixed with initial claims modestly better than expected though continuing claims were modestly worse. The USD did weaken on weaker PCE numbers - Core PCE was 0.2% MoM against expectations of 0.3%. Later in the NY morning, US Manufacturing PMI for November printed at 47.7 vs expectations of 47.6 while October Construction Spending declined by 0.3% to be lower than expectations of a 0.2% decline. The November ISM Manufacturing data with the headline result falling to 49.0 from 50.2 to be worse than expectations of 49.7. Equities closed mixed across the board, with the Dow down -0.5%, S&P500 flat and the Nasdaq drifting slightly higher at 0.2%. Tonight, investors will be locked in on the US employment data as it may influence expectations for future hikes from the FOMC as they look for signs of a slowing labour market; The futures markets are currently pricing a 51bps hike for the Fed's December meeting.
EUR
Overnight the AUDEUR touched 3-week highs, peaking at 0.6548 but fell soon after by more than half a cent, opening up at 0.6468 following numerous Manufacturing PMI data prints across the Eurozone. German Retail Sales m/m lead the string of releases, missing significantly at -2.8% vs -0.6% which shows that the ECB’s rate hikes are beginning to take effect. Dovish comments from ECB’s Stournaras appeared last night, stating further interest rate hikes should be gradual. Spain, Italy, France and Germany Manufacturing PMI’s were mixed with Spain the Eurozone printing at expectations, Italy above and France and Germany missing expectations – all PMI data were contractionary. The unemployment rates for both Italy and the EZ as a whole were better than expectations and actually improved on the previous month's read. European Equities drifted slightly higher with the DAX and CAC closing +0.6% and +0.2%. In data today, we have German Import Prices m/m & their trade balance, French Gov Budget Balance & Industrial Production m/m, Spanish Unemployment change and PPI m/m. BUBA President Nagel and ECB’s Lagarde is due to speak tonight.
GBP
The Aussie fell hard after making new two-week highs against the Pound at 0.5648, diving down to 0.5555. Data yesterday included the Nationwide Housing Price Index m/m which continued to show a heavy decline for the second month in a row, house values contracting by 1.4% in the month of November. Overnight comments from the BOE stated UK firms are expected to raise prices by 6.2% over next year, and it expects inflation to be 7.2% over the same time period which is well above the BoE's target inflation band and lends itself to higher interest rates for longer. UK firms also expect average wages to rise 5.8% in FY23. The FTSE drifted slightly lower down -0.2%. No data out tonight from the UK.
NZD
The AUDNZD forged fresh 8+ month lows, opening at 1.0686 this morning. This pair has lost 7 cents since the end of September. No data was released overnight – the Kiwi strength we’re currently seeing is most likely attributed to the RBNZ’s supersized rate hikes compared to our lighter rate hikes. In data today, New Zealand’s Overseas Trade Index q/q missed expectations, printing at -3.4% vs expected 0.4. RBNZ Gov Orr speaks later today.