Recession Fears Bring the Hurt
AUD
The Aussie Dollar is down against most majors this morning amid recession fears, as fear of economic slowdown takes its toll, not even some upbeat local data could help out the AUD. Despite the anticipated risk in markets, Asian equities were higher across the board. The Shanghai Comp was the top performer up +1.6%, the NIKKEI up +0.1%, and the ASX finished Thursdays session +0.3% higher. In Commodities Gold was down -0.8% while Iron Ore fell -0.9% also adding to the gloomy sentiment locally. Preliminary readings of Australia’s Global PMIs for June came in mixed as the Manufacturing and Services PMIs rose past market forecasts and priors but the Composite PMI eased below the previous readouts. Light on in terms of local Aussie data for the day, with the big-ticket item of the day being the RBAs Governor Low speaking at a panel discussion hosted by the Union Bank of Switzerland at 9:30pm. Looking ahead, it does seem relatively quiet on the Australian Macroeconomic calendar until of course the first Tuesday of July when we shall find out by what magnitude the next Interest Rate hike.
USD
The Aussie has lost ground against the Greenback this morning as it struggles tooth and nail to hold onto the 0.69, currently trading at 0.6904. In US Equities Wall St rebounded with strength on the close with the Dow Jones up +0.6%, S&P up +1.0% while gains on the Nasdaq shined brightest closing up 1.6%. The US had a number of data releases last night with US Jobs figures kicking things off. Weekly Unemployment Claims came in largely as expected with initial claims at 229k, 2k above the forecast of 226k while continuing claims were 1.315m compared to expectations of 1.320m. A slump in PMI numbers for June wasn’t enough to stop the overwhelming momentum for the USD. Manufacturing came in at 52.4, down from 57.0 and below expectations of 56.0 with Services at 51.6, down from 53.4 and below expectations of 53.3. The Composite PMI dipped to 51.2, down from 53.6 and below expectations of 53.0. The Fed’s Chair Jerome Powell appeared for his second day of testimony before Congress. Yet this yielded little in terms of new information regarding future monetary policy decisions. Although Powell did admit that the Fed had previously underestimated inflation pressures. Looking ahead, tonight we shall see the FOMCs Member Bullard hit the wires at an event hosted by the Union Bank of Switzerland on the topic of central banks and inflation. Then later this at midnight we shall see the release of the Revised UoM Consumer Sentiment, expected to stay par followed by New Home Sales and Revised UoM Inflation Expectations which should wrap up the week for the US.
EUR
The AUD is still down in the dumps even amidst a slew of negative Euro-zone prints, currently 0.6560 at time of writing. In European Equities, markets closed in the red with the CAC closing around 0.5% lower while the FTSE lost almost -1% and the DAX closed down -1.8%. In France, June Manufacturing PMI was 51 which missed the consensus 54, while Services PMI fell to 54.4 against expected 57.5 and a previous of 58.3. German June Services PMI was 52.4, short of the 54.5 expectation with Manufacturing printing at 52 against 54 expected. German 10-year yields fell 16bps to 1.48%. The Eurozone data also missed expectations with Services 52.8 (exp. 55.5) and Manufacturing 52.0, a 24-month low (exp. 53.8). Russia has now turned off 60% of the gas to Germany, as Germany Pivots to re-opening its coal-fired power plants to avoid mass blackouts as German power prices rocket to firmly take the top-spot of highest in Europe. This morning at 12:30am German Bundes Bank President Nagel Spoke at the Joint Spring Conference on Monetary Policy and Expectations of Households and Firms, in Germany stating “Increased inflation expectations are cause for concern and monetary authorities must not react insufficiently or hesitantly”. Looking ahead German ifo Business Climate is due for print tonight a 6:00pm followed by the less important Belgian NBB Business Climate tonight at 11pm, which should wrap up the week for the region.
GBP
The AUDGBP continues its downward trajectory, currently trading at 0.5630 at time of writing. In UK Equities the FTSE closed heavily in the red, down -1.0%. Yesterday afternoon we witnessed the Public Sector Net Borrowing missed its mark printing 13.2B against expectations of 11.6B and a previous of 21.1B. The June Services PMI was unchanged from a previous 53.4 and above expectations of 52.9. UK June Manufacturing PMI was 53.4. Fear of possible recession still ring across the UK media, while UK’s top General warns every British soldier must now prepare to ‘fight in Europe’ causing increased fear in the market. Ahead the Britts will release Retail Sales data and MPC members to speak to cap the week off.
NZD
The Aussie dollar trades lower against its little cousin across the ditch currently at 1.0984 at time of writing. It will be a generally quiet day from neighbors as today marks the Bank Holiday of Matariki. This should wrap up the week for the NZ region.