AUD Steady Ahead of Tomorrow's Employment Report

AUD

The Aussie Dollar performance has been mixed as choppy market conditions make currency pairs yo-yo up and down overnight.  Asian equities were mixed at the close, with the ASX falling -0.5% partially driven by a -10% decline in iron ore futures, whilst the Nikkei was lower by -0.8% and Shanghai Comp up +0.5%. Yesterday’s RBA minutes release was dovish, and confirmed the view expressed at the last policy meeting that the central bank is in no rush to start tightening monetary policy settings. Despite this, the Commonwealth Bank of Australia has brought forward its expectation for the first rise in the record-low 0.1 per cent cash rate from August to June this year, giving a boost to the Aussie. China’s inflation data is due early this afternoon, with YoY PPI inflation set to decline in the coming months with a higher base kicking in. However, MoM PPI could have an uptick with a recovery of commodity prices, especially oil. CPI inflation could be weaker despite the Chinese New Year holiday season. Look for any change in risk sentiment today, otherwise there’s only some secondary data released locally this morning, the MI Leading Index.

USD

The AUDUSD trading stronger after a large risk reversal, even trading at lows of 0.7102 at one point yesterday, now trading at 0.7151. The headline US Producer Price Index (PPI) rose at an annual pace of 9.7% in January, according to the latest report from the US Bureau of Labor Statistics on Tuesday. That was well above the median economist forecast for 9.1%. MoM, PPI came in at 1.0% in January, well above expectations for a 0.5% MoM gain. Core PPI metrics were also significantly hotter than expected, with the YoY rate falling less than expected to 8.3%, against forecasts for a decline to 7.9%. Risk appetite has improved on Tuesday with Russian government officials, including President Vladimir Putin, confirming that troops will be partially withdrawn from the Ukrainian border. Geopolitical tensions remain elevated and the risk of a new Russia/Ukraine conflict high, but generally speaking, risk-sensitive assets have been doing well, which partially explains some of the AUD strength. The NASDAQ was +2%, in late trade while the S&P 500 and the Dow Jones were +1.4% and +1.2% respectively. Next on the docket out of the US will be Retail Sales and FOMC meeting minutes released early tomorrow morning.

EUR

The AUDEUR lower as risk in the region improved, losing out on the 0.63 handle again to trade at 0.6293 this morning. In early European data, the German ZEW Survey for February was a little worse than expected with Expectations at 54.3 compared to forecasts of 55.0. Also released was the EU’s Q4 GDP which came in at 0.3% QoQ and 4.6% YoY, in line with current expectations. Little reaction to the data as it generally takes a step-aside as the ongoing situation in Ukraine/Russia takes main stage. New German Chancellor Scholz met with Russian President Putin and held a joint press conference in which the German leader called for calm and stressed that a diplomatic solution was still possible. Putin noted that there was no constructive response to Russian proposals though there was some room for discussions though wanted to solve the issue of possible membership of Ukraine in NATO now with his view that NATO “was at our door”. He also called the treatment of Russians in the Donbass region of Ukraine as genocide. Must watch developments in the region as coming days look to be crucial.

GBP

The AUDGBP advancing even if just marginally, trading at 0.5278 this morning. UK unemployment rate in December was unchanged from the previous month and in-line with expectations at 4.1%. However, earnings failed to keep up with rising inflation in the last quarter of 2021 despite the UK recording annual growth of 4.3% in total pay ahead of forecasts of a rise of 3.8%. Looking ahead to the rest of the week, geopolitics will of course remain key to watch, however the UK releases their CPI data this evening which will likely offer fuel for speculation that the BOE will raise rates again at the next meeting

NZD

The AUDNZD resumes a similar position to yesterday morning, following suit to trade in wide ranges and sitting at 1.0769 currently. With no notable data out of the Kiwis, direction is taken directly from risk sensitive news in Europe. Although, New Zealand and China modernized their 2008 free-trade agreement, with the NZ Minister of Trade and Export Growth Damien O’Connor saying that “our primary industry exports forecast to hit a record $50 billion this year alone.”