Risk Sentiment and Strong Commodities Help AUD

AUD

The Australian Dollar finished last week strongly, opening higher this morning against most major currency’s pairs as risk-on sentiment tempted investors into risker assets like the AUD. Also reflecting the upbeat mood, Asian equities closed higher on Friday with the Nikkei rising 0.5% , Hang Seng up 2.7% and the ASX rose 0.7%. There was no Aussie data out on Friday, with the only data of relevance being China's CPI y/y coming in at 2.5%, 0.3% under expectation and China’s PPI y/y coming in at 2.3% almost a percent under expectation. We also had China's M2 money supply which was bang on expectations, The poor data had little effect on currencies with the market sentiment remaining firmly buoyant. Commodities were mostly up supporting the risk on trend and the Aussie dollar with Crude oil +3.2%, Gold +0.4%, Silver+1.5%, Iron Ore +0.9% with Natural Gas being the only commodity being considerably down at -7.9%. A quiet day on the domestic data calendar, China also has bank holiday. The main local piece of data for the week will be Thursday's Unemployment Report.

USD

AUD opens almost a full cent higher this morning, riding a wave of positive market sentiment and strong Commodity prices to start the week at 0.65844 at time of writing. Wall St closed the week on a positive note with the NASDAQ closing +2.1%, the S&P 500 +1.5% and the Dow Jones +1.2%.  Crude oil rose 3.2% to $86.30 a barrel while US yields edged fractionally higher. Fed commentary coming from Waller and George ahead of the blackout period with both stating their support for further significant rate hikes next week. Futures market are currently pricing in 72.7bps of rate hikes for the Fed meeting next Wednesday evening. No Data coming out of the US today, keep an eye out for CPI and Core CPI m/m coming out tomorrow, which have potential to sway markets.

EUR

The Aussie dollar steadily strengthened throughout Friday, opening slightly off the highs at 0.6795 this morning.
European equities followed the global trend, closing higher on Friday with both the DAX and CAC +1.4%.   The ECB’s Knot said a 75bp hike was a powerful signal, but more steps should come, as curbing the dynamic in inflation is the ECB’s only concern. Villeroy also noted the ECB doesn’t yet know the terminal rate but they should be at the neutral rate of below or close to 2% by year-end. In other news, Saturday saw the ECOFIN Meetings, where Executive Vice-President Dombrovskis outlined three main goals; ensuring public debt sustainability, to not implement a one-size-fits-all approach, and stronger enforcement in case of non-compliance. Although this did little to move markets it help set a tone for future EU meetings. There is no major data coming out for the Eurozone today with only the Italian Industrial Production m/m.

GBP

After a volatile week against the Pound, the Aussie dollar pushed back on Friday night, flirting with one week highs and opening this morning at 0.5893. The FTSE closed 1.2% higher following the global trend of strengthening equites.  Interestingly India overtook Great Britain as the world's fifth largest economy over the weekend. After a distinct lack of economic data on Friday, a busy day ahead with the Construction Output m/m, Goods Trade Balance, Index of Services 3m/3m, Industrial Production m/m,  and the Manufacturing Production m/m. But the main piece of data will be the GDP m/m will be released at 4pm today markets expecting a 0.3% increase which would help the UK avoid a technical recession for now, considering the previous result was contractionary at -0.6%.

NZD

AUD forged higher here as well, reclaiming the 1.12 handle and opening at a firm 1.1202 at time of writing. This morning's NZ Visitor Arrival m/m showed another strong increase of 41.8%, following on from a previous 30.1% increase. Looking to the week ahead and the data highlight will be Thursday morning's NZ GDP data which is expected to show a strong 1.0% for Q2.