AUD Flounders As Risk Sentiment Sours

AUD

The Aussie dollar is trading lower across the board this morning with the currency trending lower on Friday and finding little respite throughout the weekend. There was little local news to inspire any Aussie strength on Friday and China was absent from the table too. Local equities suffered as the ASX finished Friday’s session down 1.8%, suffering its worst week since the pandemic-induced meltdown in 2020, down 6.6%. Asian equities closed the session mixed with the CSI 300 +1.4% and Nikkei -1.8%. Commodities were also in the red with Iron Ore & Copper both closing down -0.5% & -2.4% respectively. The lack of local news allowed potential US Fed rate hike talk of 75Bps to encourage risk-off movements resulting in USD strength (see below). Looking ahead there is no news of note to kickstart the week locally or In China however RBA Governor Lowe is expected to speak tomorrow morning. Whilst AUD has enjoyed mixed fortunes recently, volatility is certainly high at the moment so opportunities to capitalise with market orders prevail.

USD

AUDUSD trading over 100bps lower from Friday, opening at 0.6939 after Fed talks of another 75Bps rate hike in July galvanized USD strength over the weekend. There was some low-level US data on Friday including monthly Industrial Production figures which came in at half of expectations at 0.2%. However, the talk of the day was the Fed’s Kashkari and George take on inflation, with Kashkari supporting another 75bp hike in July. Powell also lent his voice on Friday night saying that Fed was ‘Acutely Focused’ on Returning Inflation to 2%. Markets then shifted to risk-off with the USD strong across the board through the NY session. Wall street was relatively unaffected with the Dow Jones & S&P 500 closing down either side of flat. US Banks are on holiday today and there is no news on the docket however FOMC Member Bullard is also expected to speak overnight, time will tell if all members of the FOMC are adopting a uber hawkish stance on Interest Rate hikes.

EUR

AUDEUR tumbled 60bps over the weekend, briefly dipping below the 66c handle & finding itself at 0.6614 this morning. Friday night saw a sprinkle of data beginning with annual EZ CPI which matched expectations at 8.1% & Italian Trade Balance figures which printed a deficit of -3.6B, an excess -1B on forecasts. ECB’s Knot also said if inflation worsens then several 50bps hikes are possible. European equities saw little action with the DAX & CAC closing up 0.7% & down 0.1% respectively. Looking ahead there is little to look forward to save monthly German PPI figures and a speech by ECB President Lagarde being held tonight.

GBP

AUDGBP briefly claimed the 57c handle on Friday before proceeding to trend lower through the weekend opening at 0.5677 this morning. There was little in the way of data on Friday however many members of the BoE hit the wires throughout the weekend. BoE’s Pill said financial markets will have to make their own judgement on whether the BoE is considering a 50bp hike, adding that price pressures becoming embedded will be a trigger for more aggressive BoE action. He continued by saying the BoE had underestimated inflation in the UK, however, they don’t think policy is behind the curve. UK Equities also had a subdued Friday with the FTSE 100 closing down 0.4%. Earlier this morning Rightmove released its monthly Housing Price Inflation Report outlining a 0.3% bump in housing inflation for the month. Looking ahead there is little in the way of data however MPC members Haskel & Mann are expected to speak later today and Wednesday will see the release of CPI figures which are expected to print at 9.1% for the year (ouch).

NZD

AUDNZD continues to fall away from its 5-year highs, opening lower at 1.0985 this morning. The Friday session and the weekend offered little in the way of data for the Kiwi. However earlier this morning Business NZ released its monthly Services Index which surveys Purchasing Manager sentiment. The report printed an encouraging figure of 55.2 (52.2 prior) outlining an improving business sentiment for the country. Tomorrow will also be a slow news day with the Westpac Consumer Sentiment report being the only data on offer.