Key European Inflation Data Due Tonight
AUD
The Aussie Dollar trades on either side of even against its peers, with a sour market mood still gripping markets and holding the Aussie down. Asian equities were lower on Thursday, with the Nikkei -1.54% and Hang Seng closing down 0.6%. The ASX fell -1.97%, closing down -10.2% for the financial year ending 30 June, with losses seen across the board on Thursday. The only piece of Australian data was Private Sector Credit which came in higher than expectations, printing at +0.8% instead of +0.6% forecasted. No real reaction to the data though. Of more significance within the Asian economy was the Chinese Manufacturing PMI. China's factory activity came in at 50.2, expanding for the first time in four months, after authorities ended the lockdown in Shanghai. The shift from 49.6 in May indicates the shift from contractionary to growth, although the figure missed analysts' expectations of 50.5. No real Aussie data as the working week comes to a close, with no additional stimuli for next week’s all important RBA interest rate decision.
USD
The AUDUSD made a positive stride into the 0.69s with the US posting some weaker data overnight, though the Aussie couldn’t retain the gains and dropped back to trade at 0.6897. Equity markets lost ground overnight although the major US indices managed to claw back some of the earlier losses, with the S&P index managing to close the day -0.9% lower. US Personal Income for May rose +0.5% as expected with Personal Spending up +0.2% to fall short of expectations of +0.4%. Core POCE for May was +0.3% MoM and +4.7% YoY, both weaker than expectations by 0.1%. Also released were Weekly Jobless claims which came in as expected with initial claims printing at 231k (230k exp). Released later in the session, Chicago PMI for June fell to 56.0, down from 60.3 and below forecasts of 58.0. The Greenbacks strength remains largely intact, given rising worries about a global recession, although last nights data was far from impressive and did nothing to allay concerns about the US economy sinking towards a recession. Tonight will see the release of the ISM Manufacturing Index for June. The significance comes as some of its components like New Orders are considered forward-looking indicators of economic activity and a poor result could spell a gloomy outlook looking ahead.
EUR
The AUDEUR had a sharp move up to highs of 0.6636 before stumbling all the way back to 0.6581, almost identical levels to yesterday morning. European markets fell on the open but pared some losses, though still closed heavily in the red with the CAC losing -1.8% whilst the DAX closed down -1.7%. German labour market surprised sharply with the unemployment claims rate rising to 5.3% from 5.0%. At face value that was alarming, but the sharp rise was explained by refugees from the war in Ukraine adding to jobless claims. Of more importance however will be Eurozone CPI. The results will help shape the ECB’s rhetoric and policy response over the months ahead. Forecasters suggest that is every chance that CPI will accelerate again, especially with PPI running at +37% y/y. Another (likely) record high in the Euro-area estimate should be enough to persuade policymakers to aim for a +25bp rate hike in July, followed by +50bp in September.
GBP
The AUDGBP was trading sideways over the last 24 hours with little to inspire movement in either direction, now trading at 0.5669. The Britts did however release handful of largely ignored data. Final GDP q/q came in as expected at 0.8%, Nationwide House Price Index was lower at 0.3% instead of 0.5% expected and 0.9% previously. As mentioned, the data did not sway markets as recessionary fears remain the key catalyst in markets. This looks to continue with only some Final Manufacturing PMI and Mortgage Approvals on the agenda for the remainder of the week.
NZD
The AUDNZD also finding itself giving up early sizeable gains to trade in-line with yesterdays opening rates, currently trading at 1.1055 at time of writing. ANZ released their Business Confidence Index yesterday which dropped to near record lows, falling 7 points to -63% in June. The key takeaways from the data were that businesses are finding cost and inflation pressures at extreme levels, and supply-side issues are firms’ biggest problems: finding skilled labour, costs, and wages being the top three.