US Labor Force Conditions Remain Strong
AUD
The Aussie Dollar managed to get through the weekend relatively unscathed with no real losses or gains against any currency pair, though it could be slow-moving to start the week off with a light calendar to kick things off. Asian equities finished largely higher, despite trimming gains following reports that former Japanese prime minister Abe was shot while giving an election speech. The ASX was +0.5% higher, and the Nikkei was only +0.1% better come Friday close. Commodity prices still remain pressured and overwhelmingly lower over the weekend, Iron Ore and Copper the biggest losers down -2.6% and -1.6% respectively. With no macroeconomic data due to be released today markets are focusing on the employment data which will released on Thursday with expectations that the Unemployment Rate will slip to 3.8% from 3.9% reported previously. Nothing to be reported out of China either.
USD
The AUDUSD recovered after some losses on the weekend to trade at similar levels seen Friday morning, 0.6850 the going rate. Wall St had mixed results at the closing bell with the Dow and S&P marginally lower on the day while the Nasdaq closed with modest gains. Markets were not as responsive to eased concerns of recession as the US posted respectable jobs numbers, the Unemployment rate was steady at 3.6% as expected though the Participation rate fell 0.1% to 62.2% against expectations of a 0.1% increase to 62.4%. Average hourly earnings were 0.3% as expected with the annualised result was 5.1% against expectations of 5.0%. The stronger numbers helped alleviate recessionary fears and helped see US 2 and 10 Year Bond Yields up 8bps to 3.08% and 3.10% respectively. Little of note on the radar today with markets focussed on Wednesday’s inflation numbers from the US, with evidence of broad-based inflation still remaining as Gasoline prices rose by ~10% MoM in June.
EUR
The AUDEUR was trading sideways over the weekend as the stellar run that started at the beginning of July came to a slowdown, trading at 0.6732 this morning. European Equity markets were little changed to close the session though gains at the close were varied with the FTSE up +0.1% while the CAC closed up +0.4% and the DAX gained +1.3% on the day. ECB speakers remain vocal about hiking rates this month, and the consensus remained around a 25 bps rate hike. However, a 50 bps rise could be in play, but it is not the case scenario, as mentioned on its June minutes. Despite all that, the EU’s ongoing energy crisis hit the shared currency hard during the week, as the EURUSD weekly chart illustrates the major is losing 2.47% in the week and appears it will test parity against USD in coming days. It will be an oddly quiet week ahead in Europe with second-rate data sporadically on the agenda.
GBP
The AUDGBP following the same trend with little movement in either direction over the weekend, trading just below the 0.57 handle, currently at 0.5695. Political turmoil has not done any favours for the Pound with the controversial former Finance Minister Rishi Sunak, on Friday, showed his intentions of running in the contest to replace Prime Minister Boris Johnson. Investors remain concerned that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union amid the cost-of-living crisis. Nothing to report on until some Monthly GDP data on Wednesday.
NZD
The AUDNZD also lacking inspiration over the weekend to trade at familiar levels of 1.1066 this morning. Though the lack luster vacuum of data will come to an end when the RBNZ meets on Wednesday, the main event of the week. Markets expect the RBNZ to increase the OCR by 50bps to 2.50%. Given there is a follow-up MPC meeting in August, the chances of a 75bp hike are relatively low in our view. While no new forecasts will be provided, the MPC have been clear that they aim to continue lifting the OCR “at pace” to get on top of high inflation and reduce the risk of inflation expectations becoming unanchored. We will be looking for any dovish comments, particularly about the global outlook and related uncertainty.