First Impacts of China's Fresh Lockdowns Due Today
AUD
The Australian Dollar has been exposed to choppy markets overnight due to evolving Geo-political and economic shifts in China and Europe. There were no data releases of note released locally however the ongoing conflict in Ukraine coupled with sizable shifts in China's COVID situation provided markets ample reason to move. Asian equities performed better with the Shanghai Comp closing up 2% and the ASX was no exception, up by 0.7%. Commodities followed suit with Iron Ore & Copper closing up 1.3% & 0.2% respectively. Looking ahead there is little in the way of local news save the monthly change in new Building Approvals. China’s economy is set to slow sharply as it deals with its worst Covid outbreak since Wuhan. Chinese PMIs for March are due later today and will provide the first hints to measure the damage. For manufacturing, the slowdown may be mild. The impact from Covid is mainly on logistics, so the damage on production may be much less significant at this stage. In addition, the front-loading of China's fiscal easing should have boosted demand. The services sector is set to suffer with new lockdowns in Shenzhen, Changchun and other cities, so the services PMI could dip again and stay low until the Covid outbreak is brought under control.
USD
AUDUSD has reclaimed some ground this morning and trading at 0.7510 after briefly drifting toward the 0.75c handle overnight. Data from the US was mixed and was kicked off with the ADP Non-Farm Payroll figures which showed that the US added 455k new jobs in March, slightly more than expectations of 450k. Released shortly afterwards, US Q4 GDP was revised down to 6.9% from 7.0% with Personal Consumption revised down to 2.5%. Testifying before Congress, US Trade Representative Tai said that trade talks with China had been “unduly difficult” in a sign that US-Sino relations would remain difficult. Additionally, Fed member Barkin said he was open to 50bp rate hikes if they were needed. US Equities reacted poorly with the NASDAQ closing down -1.2% and the Dow Jones -0.2%. Tonight markets can expect the release of the monthly Core PCE Price Index which is the US Federal Reserve's primary inflation measure. The week will of course finish with a bang - the US official Employment Report due for release tomorrow.
EUR
AUDEUR has continued to drift lower after Monday's 5 year highs, opening at 0.6730 this morning. There was a plethora of news coming out of Europe which was kicked off with Spain's Flash CPI figures which showed an almost 2% increase on last month, printing 9.8%.ECB President Lagarde was also on the wires noting that Europe is entering a difficult phase, with higher inflation and slower growth expected. ECB’s Muller did not see the threat of stagflation, adding that if inflation accelerates the ECB has tools to act. Muller continued by saying that it is too early to say the ECB will definitely lift rates in 2022. Onto Ukraine & Kremlin spokesman Peskov said peace talks yielded no breakthroughs. Germany also triggered an emergency plan to brace for a potential Russian gas cut-off, as Putin steps up demands that the fuel should be paid for in Rubles. European equities reacted poorly with the DAX & CAC closing down 1.4% & 0.7% respectively. Looking ahead, there is a slew of data for markets to digest. Monthly German Sales Figures will be released and accompanied by German Unemployment Change data. Italy will be next with its monthly Unemployment Rate and Preliminary CPI data for the month. France will also be present with its monthly Preliminary CPI & Consumer Spending figures. The release of the monthly Eurozone Unemployment Rate will round out the releases. The extensive release of data paired with the ongoing updates in Ukraine will provide ample reasons for market movement going into Friday.
GBP
AUDGBP is trading at 0.5717 this morning & holding close to its 4 year high after weathering a choppy session overnight. There was no major news coming out of the UK however MPC Member Broadbent was on the wires urging his colleagues in Central Banking that they communicate in a way that members of the public and markets can clearly understand. Contrary to Euro and US stocks, the FTSE managed a gain of 0.6%. Tonight there is a block of data of coming out of the UK with the release of Quarterly Current Account & Final GDP figures. They will be accompanied by monthly HPI figures which are a leading indicator of inflation in housing prices & quarterly Revised Business Investment to round out the session. The ongoing conflict in Ukraine and stutter in Ukrainian peace talks will also no doubt be a factor in the Pound’s movements.
NZD
AUDNZD has handed back some of its recent gains, back down to 1.0768 this morning which is the low point for the week. The monthly ANZ Business Confidence report was released yesterday which is a leading indicator of economic & overall business health. The report printed -41.9 which signalled a continuation of business pessimism for the Kiwi.