Aussie Interest Rates Reach 10 Year Highs
AUD
The RBA's 25 basis point interest rate hike yesterday failed to move AUD to any great extent with most economists and the futures markets expecting the result. This hike takes the official cash rate to 3.1% with no more chances to raise rates now until the February meeting. The accompanying statement indicated that higher interest rates are still on the cards next year, with; “The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course. It is closely monitoring the global economy, household spending and wage and price-setting behaviour.” The AX was down 0.5% on the close with other Asian Equities mixed with NIKKEI +0.2% and the Shanghai Comp flat. Commodities were also somewhat mixed with Crude Oil -3.5%, Natural Gas +3.3%, Gold flat, Silver +0.1% and Iron Ore +0.4%. Looking to the day ahead, we have Australia’s GDP data for Q3 which is expected to show that growth in the Australian economy slowed in Q3 but remained solid with markets expecting 0.7% increase compared to the previous quarter's 0.9%. China’s November trade data will also be released today and high frequency data such as Korean exports and shipping costs point to slower trade activities on shrinking global demand. Meanwhile, the surging Covid cases and policy back-and-forth took a heavy toll on the supply chain and domestic demand.
USD
In what was a data-free overnight session the AUDUSD clambered back up into the 0.67s temporarily before giving up all gains to open slightly lower this morning at 0.6688. Wall Street was lower on close with the Dow Jones -1.3%, S&P 500 -1.7% and NASDAQ -2.1%. Little in the way of data in the North American session with Trade Data released on both sides of the border. The US trade deficit for October expanded to $78.2B though this was less than expectations of an $80.0B deficit. Canada recorded a trade surplus of $1.21B, up from $610B and better than forecasts of $900M. Tonight we have some mid-tier data being released in the form of Crude Oil Inventories, Revised Nonfarm Productivity q/q and Revised Unit Labor Costs q/q. We have to wait until Friday night before the top tier USD data resumes in the form of Producer Inflation numbers.
EUR
AUDEUR remains towards the bottom of its 6-week range having failed to maintain gains above 0.64 to open only slightly higher this morning at 0.6390. Euro Equities fell slightly on close with the CAC -0.1% and DAX -0.7%. Yesterday we saw German Factory Orders m/m surpass market expectations of a +0.2% coming in at +0.8%. ECB’s Lane hit the wire at the ECOFIN Meetings saying he expects more hikes will be required but added a lot has already been done. He continued saying that he is confident the Eurozone is near its inflation peak, and past rate hikes must be taken into account in the future. He sees the inflation rate next year going down towards 6-7%. Tonight there is more mid-tier data out of the Eurozone with the German Industrial Production m/m, French Trade Balance, Italian Retail Sales m/m, Final Employment Change q/q and Revised GDP q/q.
GBP
The Aussie dollar finds some respite against the GBP after touching 9-month lows of 0.5475 last night before regaining the 55 handle this morning, opening higher at 0.5510. The FTSE followed the trend of the European Equites, closing lower by 0.7%. Yesterday’s session presented mixed data coming out for Britain, with the BRC Retail Sales Monitor y/y beating a previous reading of 1.2%, coming in at 4.1%. We also saw the Construction PMI missing by 1.6 coming in at 50.4. A quiet day ahead with only the Halifax HPI m/m to look forward to tonight.
NZD
The AUDNZD briefly skimmed 1 year lows yesterday, bottoming at $1.0563 prior the RBA Cash rate announcement before a short-lived post-RBA rally, opening this morning not far from the bottom at 1.0582. This morning we was saw the release of the GDT Price index, which was down from a previous reading of 2.4% to 0.6%. Nothing out of New Zealand until Friday’s Manufacturing Sales q/q .