USD Strong as Risk Sentiment Wanes
AUD
The Aussie Dollar was overwhelmingly weaker overnight, with losses against the Greenback tarnishing minor gains across other pairs. Asian equities closed higher on Tuesday, with the Nikkei +0.66% and Hang Seng rising +0.85%. The ASX closed +0.86% higher, with energy leading the gains while materials and utilities also climbed. Commodities have performed poorly in the last 24 hours, with Gold and Silver remaining flat, Iron Ore lost out -0.2%, though Copper managed to fare better up +0.4%. There is some support for the Aussie brewing away as China’s Covid Zero policy looks to have successfully brought the spring outbreak under control, with new infections under 100 a day for almost two weeks, no major cities in a widespread lockdown, and more provinces reporting no cases at all. Nationwide, China is reporting the lowest number of new cases since early February. Of its top 50 cities by economic size, only one district in Shenzhen has widespread restrictions in place. Recent outbreaks in Beijing and Inner Mongolia look to have been quashed. This has reduced overall risk sentiment, favouring the AUD, and gives hope to commodity exporters who have been suffering without the ability to trade with our biggest trade partner. If these lockdowns stay quashed, AUD should look to regain hope, and the AUD bulls should regain confidence.
USD
AUDUSD trades lower this morning, despite some poor data from the US, the pair gave back any gains from earlier on in the day as it trickled back down to trade at 0.6903 at time of writing. US equities have performed dismally in the last 24 hours, all losing out heavily with the Dow Jones -1.6%, the S&P 500 -2.0%, and the NASDAQ the worst performer, losing out -3.0%. The main event of the night was CB Consumer Sentiment index which showed that households are feeling the pain of sharp cost of living increases. The Conference board measure of consumer confidence fell more than expected in June to 98.7 from a downwardly revised 103.2, a 16-month low. In other data, preliminary US wholesale inventories rose in-line with forecasts by +2% in May, while the Richmond Fed Manufacturing Index was surprisingly weaker at -19 compared to expectations for a small improvement and flagging risk of a softer ISM Manufacturing print on Friday. Looking ahead, FOMC Member Mester will cross the wires, as well as Fed Chair Powell, and Final GDP q/q data will be released tonight.
EUR
AUDEUR trades higher this morning, reaching one-week highs of 0.6595 before contracting to trade at 0.6563 at time of writing. European equities were higher at the close, with the CAC up +0.6% and DAX +0.3%. The risk of an energy crisis in connection with the war in Ukraine remains in place so that it is questionable whether investors will be willing to bank on further EUR gains. The was central bank chatter last night amongst the ECB Forum, with the ECB’s Kazak saying that it’s worth looking at a 50bp hike in July, with this week’s Eurozone CPI possibly helping his case. Kazak added that the risk of recession is non-trivial and that fragmentation risk can’t impede monetary policy. Shortly after, Lagarde reaffirmed the ECB’s intention to raise by at least 25bps in July and said the supply shock could linger for longer. Lagarde also mentioned that inflation in the Eurozone would be undesirably high for some time and that the size of the September rate hike will be higher if needed. Looking ahead, it is questionable whether the speech by ECB President Christine Lagarde at the ECB forum in Sintra is going to provide any new momentum for EUR tonight. In the way of economic data, German Prelim CPI m/m will be released today.
GBP
AUDGBP has advanced this morning, scraping one-week highs of 0.5682 before declining back slightly to trade at 0.5664 at time of writing. The FTSE fared relatively well in the last 24 hours, gaining +0.9% on the close. Pessimism surrounding Brexit, economic slowdown and inflation woes keep the downside bias intact. Although the Northern Ireland Protocol (NIP) passed the first hurdle to becoming the law in the UK’s House of Commons, the Brexit protests have recently gained momentum in Britain. The same exert more pressure on Prime Minister Boris Johnson as Brexit is considered the core of Conservatives’ winning recipe. Looking ahead, BOE Governor Bailey will cross the wires this evening, and a quiet close to the week in the way of data for the Pound.
NZD
AUDNZD trades significantly above where it opened yesterday, having grazed almost two-week highs of 1.1080 before reverting back to 1.1067 at time of writing. Nothing out of the Kiwis for the day though the RBNZ’s Statement of Intent will be released later today, which will give some direction but is unlikely to outweigh risk sentiment.