33% Chance of 50bps US Rate Hike in March

AUD

The Australian Dollar is trading lower against the majority of its peers this morning. The ASX was up 0.6% on Friday, +1.9% for the week, ending its 3-week losing streak, with tech leading the move higher. Other Asian equities also performed strongly with the Hang Seng the standout, posting 3.2% gains. Commodities were mixed with Iron Ore & Copper closing -0.1% & up 0.7% respectively. It's a quieter week ahead on the data front. This morning saw the release of the AIG services index printing an encouraging 56.2 with 50 being the baseline for economic expansion, and later today monthly Retail Sales figures are due. With the bank holidays for Chinese New Year now over, the Chinese data will kick off with Caixin Services PMI which surveys 400 purchasing managers on issues like business conditions, employment & production levels. In the absence of top tier economic data, AUD fortunes to be driven by risk sentiment (Ukraine/Russia and Omicron) and RBA Gov Lowe will speak on Thursday. 

USD

AUDUSD is trading at lower at 0.7080 after touching early weekly lows on Saturday. USD strength was evident in the US Non-Farm Payrolls for January which printed at 467k on Saturday to easily beat expectations of 125k. The Unemployment Rate rose slightly to 4.0% against expectations of no change at 3.9% though the participation rate unexpectedly jumped 0.3% to 62.2%. Completing a solid report, average hourly earnings was 0.7% MoM and 5.7% YoY, easily beating expectations of 0.5% and 5.2% respectively. US yields were higher on the back of the encouraging report which was a driver for USD strength, however Wall Street was largely unaffected by the higher yields, the Dow Jones closing down 0.1% and S&P 500 closing up a modest 0.5%. Interestingly, markets are now pricing in a 33% chance of a 50 basis point interest rate hike at the Fed's next meeting in March. Looking ahead and the US highlight in what is a quiet week of data will be the CPI numbers on Thursday night.

EUR

AUDEUR is struggling this morning, opening not far off 4-month lows at 0.6175. The EUR strength was driven by ECB talk, rather than data which fell short across the board. Eurozone Retail Sales dropped by 3% in December, weaker than an expected. French Industrial Production YoY for December missed expectations of +0.5%, printing -0.5%. Following the open, ECB bankers shared some insights with ECB’s Kazimir foreseeing an elevated inflation level for longer than expected. Muller has said the ECB is ready to adjust plans for near future if necessary. European equities had a negative reaction and the DAX & CAC closed down 1.7% & 0.8% respectively. Looking ahead, tonight Germany will release its monthly Industrial Production numbers which will be followed by a speech by ECB President Lagarde.

GBP

AUDGBP is trading at 0.5233 after rebounding modestly from a weekly low late Saturday. UK Data was encouraging with the Construction PMI for Jan printing 56.3 & beating expectations off 54.3. Nevertheless, UK equities reacted similarly to their European counterparts and the FTSE closed down 0.2% for the session. Looking ahead the Halifax Bank of Scotland with release its monthly HPI which outlines the change in the price of homes financed by HBOS. The highlight for the week will be comments by BoE Gov Bailey on Thursday night.

NZD

AUDNZD is currently trading at 1.0699 this morning and holding at weekly lows. Although there is no news today, RBNZ Gov Orr will speak tomorrow afternoon and his speech may provide insight into how the RBNZ will shift rates higher still going into 2022.