AUD Up Across the Board
AUD
The Australian Dollar improved significantly overnight and trades higher against most of the major G10 currency pairs. The Australian Share market lost ground on Tuesday following a slide on Wall Street, the local index fell -0.5% on the close to 6,650 points. Asian Equities were relatively subdued throughout their session with the Shanghai Comp closing with next-to-no movement, whilst the Nikkei gained +0.6%. Early in the Tuesday session, the RBA released the latest policy meeting minutes. The minutes offered a modest and impulsive boost to the Aussie with the Central bank noting that the current level of cash rate is well below the estimated neutral level. This suggests further increases in the OCR will be needed to return inflation to the target level. Looking ahead to today, we will hear from the Governor Lower, with a Q&A to follow. Following last weeks stronger labour data, it is likely that Lowe will be queried about the changes to the upcoming meeting, with some economists predicting the changes of a 75bps rate increase at the August meeting.
USD
AUDUSD climbed to above the 0.6900 handle overnight and hit fresh two-week highs as the pair trades at a rate of 0.6903 at the time of writing. The US dollar staged a corrective pullback from recent strength as the US Dollar Index (DXY) dropped to its lowest level since June 6th. U.S 2 year and 10-year yields ticked higher to 3.01% and 3.23% while crude oil managed gains of +1.5% and closed at $104.10 a barrel. US Equities closed largely in the green with the Nasdaq gaining +3.1% on the close, the S&P 500 up +2.7% and the Dow Jones gained +2.4%. Into the NY open and US Housing Starts for June declined by 2.0% to 1.559mio, weaker than expectations of a 2.0% increase to 1.580. Building Permits declined by 0.6% to 1.685mio to beat expectations of a 2.7% fall to 1.650mio. No reaction to the data. Traders will take further take cues from the broader market risk sentiment, which could drive demand and produce short-term opportunities around the AUD/USD pair.
EUR
AUDEUR gained positive traction and trades at higher levels this morning with the pair trading at a rate of 0.6743 at the time of writing. European Equites closed with large gains on Tuesday with the French CAC up +1.8% while the DAX in Germany finished +2.7% higher. There were headlines out of Europe suggesting the ECB could discuss a 50bps rate hike when it meets later this week. Additionally, ECB policymakers are honing in on a deal to make new bond purchases conditional on next generation EU targets and fiscal rules. European Commission has decided to ease some of the sanctions on Russian banks to allow food trade. Finally, the headlines suggested that Russian Gas giant Gazprom would resume its gas provision to the EU as planned on July 21st. Recession concerns has seemingly cooled a bit but the picture is still gloomy. To the data ahead, there is little to report on in the Eurozone with German PPI being the key data of note.
GBP
AUDGBP climbed on Tuesday evening and printed a fresh one-week high this morning as the pair trades at a rate of 0.5749 at the time of writing. FTSE 100 index ended higher again on Tuesday in London, extending recent advances, helped by strong Wall Street gains. At the close, the UK index gained +1.0%, well above the yearly low. There’s a flurry of economic releases for the pound this evening with CPI data being the key release. UK inflation data is likely to show another strong print. There are expectations of the headline CPI inflation to be 9.2% in year-ended terms. UK CPI hit a 40-year high of 9.1% in May, the highest among the G7 leading economies and has been forecasted to climb to higher levels despite a series of interest rate hikes. As households are feeling the strain. Eye-watering grocery and energy bills have thrown Britons into the worst cost-of-living crisis in decades with the BoE predicting that disposable incomes may suffer their second biggest decline since 1964.
NZD
AUDNZD bucked the trend to trade lower, despite printing a fresh monthly high on Tuesday, the Kiwi pair trades at a rate of 1.10648 this morning. In early data on Tuesday, Fonterra announced the details of their latest milk dairy auction with the GDT Price Index down -5.0% and Whole Milk Powder price fell by -5.1%. Little to report on domestically. In the absence of any major market-moving NZ data, the AUDNZD remains at the mercy of US Dollar price dynamics, as well as fresh impetus from the RBA Philip Lower Q&A this morning.