AUD Pars Losses Supported by Commodities
AUD
The Aussie dollar opens up against majors, while the ASX fell -0.7% with energy and financials driving the losses. Little in the way of data yesterday, with our Trade Balance printing at $12.22b, down $227m from the previous figure yet exceeding expectations of $12.1b. Notably, Goods and services debits (imports) fell $340m (0.7%) driven by fuels and lubricants. The RBA Bulletin was also released, which tends to have a mild impact as it contains previously-released data, with the key takeaway being that the central bank has developed new measures of financial stress. Designed to provide timely data that helps identify emerging household and business pressure, the new indicators are based on news archives, individual web searches and social media activity. The RBA says the new metrics could fill the gap on early-stage financial stress. No local data today, while China’s CPI data will draw attention. The figure is expected at 1.6% y/y for November amid continued Covid disruptions, down from October’s y/y figure of 2.1%. Service and rent inflation could also edge down as the surging covid cases and policy back-and-forth took a heavy toll on economic activity during the month. Notably, Macquarie Group economists maintain risks are still to the downside in China, in contrast to the ongoing inflationary challenges faced by other global economic powerhouses.
USD
AUDUSD opens up at 0.6771 with a constructive session for US equities ahead of upcoming PPI data (one of the final pieces of key data ahead of the Dec 15 policy meeting). The S&P closed up 0.5%, Down Jones up 0.4% while the NASDAQ rallied 1.1% as the tech-heavy index put a stop to a 4-day losing streak. Crude oil pushed early gains towards 4% ahead of the NY morning following the closure of the Keystone pipeline in the US for repairs, with commodity currencies rallying in the aftermath. Little reaction to the US weekly jobless claims, printing on expectations at 230k. Economists have been watching continuing claims more closely in the recent weeks as they serve as an indicator of how hard it is for people to find work after losing their job. They’ve also been known to hint at upcoming recessions. Although the gauge has been generally rising for the last two months, it’s still near historic lows. Little in the way of data ahead of tonight’s PPI release (core expected to fall to 5.9% y/y from 6.7%) and then an incredibly busy week into Tuesday’s CPI release and Wednesday’s FOMC meeting.
EUR
AUDEUR opens up at 0.6413 as lack of economic data left investors looking ahead to ECB’s President Lagarde speeches at the Sixth Annual Conference of the European Systemic Risk Board. There would have been a disappointment for those looking for forward guidance on the euro area economic outlook, inflation and monetary policy. Turning to crypto, she noted that Europe is at the forefront of crypto regulation while ‘Systemic risk could arise from interlinkages between crypto and traditional finance’. No data today today and a relatively light week ahead of next Friday’s ECB interest rate announcement. ECB Governing Council Member Gabriel Makhlouf expects borrowing costs to be lifted by a half-point this month, slowing the pace of increases after inflation moderated for the first time in 1.5y.
GBP
AUDGBP opens at 0.5533 with the FTSE closing down -0.2% amid investor jitters regarding recessionary fears. Looming central bank decisions could keep moves muted this week, with the BOE widely expected to raise interest rates by 50 basis points next Thursday as it continues to fight double-digit inflation. The RICS House Price Balance indicated Britain saw the most widespread house price falls since 2020, which was no surprise given the cost-of-living crisis and policymakers in the process of tightening, not loosening, fiscal and monetary conditions. Light in the way of data ahead of next Thursday’s rate decision. As in much of the world, inflation in Britain has been rampant, elevated by surging energy costs following Russia’s invasion of Ukraine that has also further disrupted supply chains still healing from the pandemic. The BOE is expected to raise by 50bp next Thursday, taking borrowing costs to 3.5% despite the economy falling into recession, as it battles inflation running at more than 5x it’s target.
NZD
AUDNZD opens up at 1.0610 off the back of crude oil gains driving commodity currency strength. Manufacturing Sales q/q increased 5.1% with little impact on the rate. Notably, manufacturing (up $1.7b), construction (up $1.0b) and wholesale trade (up $1.0b) industries had the largest movements in sales.