Full Steam Ahead at RBNZ
AUD
The Aussie Dollar has seen quite the mixed session against its counterparts amid a week heavily influenced by the central banks. The local equity market saw the ASX gain 0.4%, with the Shanghai Comp fairing the strongest up 1.2%, while the NIKKEI came in a little lackluster falling -0.3%. In local Commodities Gold rose 0.5% and Iron Ore down -0.8%. A relatively quiet day in local market news today, yet this morning we will see the first Q1 GDP partial indicators for Australia. It is projected by experts that private capital expenditure will have been stronger (+1.6% q/q) due to expectation that private equipment rose solidly in Q1, although past performance is never an indicator of future performance, it does offer more confidence. We are yet to hear any major news on the loosening of Covid lockdowns out of China, yet the CCP have offered assurances that they will be cutting some red tape which will offer a positive impact on the AUD if such rhetoric does result in action in the immediate future.
USD
The Aussie Dollar is trading slightly lower against the Greenback this morning after a tumultuous period overnight, currently holding just short of the .71 handle at 0.70938 at time of writing. US data overnight all fell short of expectations, including Durable Goods Orders and Crude Oil Inventories, however these data points were largely overlooked with the FOMC Meeting Minutes approaching. In anticipation of the FOMC Meeting minutes the USD was strengthening, AUD eventually finding support at 0.7035 to bound back just shy of the 0.71 handle as the meeting minutes offered stable yet no exceptionally hawkish rhetoric. What the Meeting Minutes demonstrated was that all Fed members were determined to restore price stability with most backing 50bp hikes at the next few meetings while supporting the view that policy may need to be move into restrictive territory. The minutes also offered credence to members supporting the reduction of the Fed’s balance sheet including some support for MBS sales. Perhaps the Fed was not as bullish as markets had expected which opened allowed AUD to reclaim some of the previous losses. Wall Street also welcomed FOMC Meeting Minutes with equities in the green supported by the stable yet positive speak hinting at two 50 bps rate hikes. The DOW JONES was up 0.6%, the S&P 500 saw a rise of 1.0%, with the NASDAQ fairing best with an increase of 1.5%. Looking ahead the big ticket items of today will be the Prelim GDP data, followed by Unemployment Claims set for release at 10:30 in the night. This will be followed by a midnight release of Pending Home Sales m/m and Natural Gas Storage.
EUR
The AUDEUR pair has registered its first gain for the week, amidst what has been particularly hawkish ECB speak, currently trading at 0.6636 at time of writing. It seems a consensus on rate hikes among ECB members seems to have been solidified with ECB’s President Lagarde reiterating they are in a position to exit negative rates by end of Q3 (September). Stating: “We have one important guidepost for policy, that is to deliver 2% inflation over medium-term. The ECB will take whatever steps are needed to do so.” The Market has had a positive reaction on such hawkish speak rallying the Euro. In Equities the DAX was in the green, up 0.6% despite the prospect of imminent rate hikes in Europe. It is relatively quiet today on the Macro-economic front out of the Eurozone amid two bank holidays with both the French and German Banks shutting their doors for the day. What seems to be the most prominent marker of concern in the area remains the looming threat of Putin cutting Gas supplies to western Europe if things were to escalate amid the ongoing Russia-Ukraine War.
GBP
The Aussie has seen a decline against the Pound Sterling, descending to trading levels of 0.5637 at time of writing. Amidst a lack of macro data releases overnight, the BOE’s Tenreyo hit the wires addressing the jump in energy prices, as a result of this being quite the focal issue in the region. All this amid chatter of what may be a possible UK recession in the foreseeable future. In UK Equities FTSE was in the green up 0.5%. No data expected from the UK tonight.
NZD
The Aussie Dollar took a dive against the NZD yesterday at noon dropping a full cent, to now be trading at 1.0945 at time of writing. This was a direct result of the RBNZ raising the cash rate by 50bps up to 2.00% as predicted. Despite the 50bps being priced in, the continually hawkish tone of the RBNZ's accompanying statement strengthened the NZD against major pairs. The RBNZ Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment. The Committee said it was resolute in its commitment to ensure consumer price inflation returns to within the 1 to 3 percent target range. The NZD gains also helped AUD to some degree against other major crosses. This morning RBNZ Gov Orr hit the wires stating that monetary conditions need to act as a restraint, and believes that Household Balance sheets will be able to cope with the higher rates.