AUD Weak As Commodities Dip and Risk Comes Off

AUD

AUD down across the board with the exception of EUR (which again dipped below parity vs US) as global risk sentiment took a plunge and commodities abandoned the AUD.  A few small local data points were released over the last 24 hours, The AIG manufacturing index came in below expectation at 49.3, implying a slight industrial contraction. Private capital expenditure q/q was reported to be -0.3%. Commodity prices y/y was 21.7%. Casting an eye to our economic neighbours, the Caixin Manufacturing PMI out of China was reported to be 49.5, below the expected 50.1, signalling a slight contraction in Chinese manufacturing. The ASX was down 2%, as were commodities with Iron Ore, Crude Oil, Copper all heading south with Gold flat. Other Asian equities were unable to avoid the quickly souring mood with the Shanghai Comp -0.5% & the Nikkei -1.5%. ON the local data front, markets are looking ahead to Tuesday when the RBA interest rate announcement will take place. Futures markets currently pricing in 66bps worth of a rate hike.

USD

US dollar strength saw the Aussie fall to 7-week lows of 0.6771 against the Greenback last night before settling at the 0.6790 this morning. This would’ve been helped along by a series of positive US economic data pieces being released last night. Unemployment Claims were far better than expected coming in at 232k instead of the expected 250k. The US fed has been claiming that despite the two consecutive quarters of negative growth, their employment figures indicate they are not in a recession. The ISM manufacturing PMI also came in above expectation at 52.8, implying industrial expansion. Going against this week’s equity trend, US equities were up in the overnight session, with the S&P 500 0.3%, Dow Jones up 0.5%. The NASDAQ was the only index that didn’t break back into the green closing at -0.3%. Looking ahead, the Non-Farm employment change and official US Unemployment Rate is out tonight, which will give a clearer view of how employment is tracking in the US.

EUR

The Aussie is up against the Euro off the back of a weak EUR, which again fell below parity against USD, and falling slightly from a high of 0.6853 to 0.6823 against AUD this morning. The European Union saw a litany of data over the past 24 hours with Manufacturing PMIs for all major European nations, being released before the final collated Eurozone Manufacturing PMI was released as 49.1, signalling a slight contraction. The entire Eurozone Unemployment Rate came in at expectation at 6.6%. European equities fell into the close with the DAX closing -1.6% and CAC closing -1.5%.  A major contributor to the Euro weakness over the past day was Moscow cutting off Nord Stream 1 to Europe, just as an energy crisis hits the continent. Outwardly the Russia energy company Gazprom said gas supplies were stopped via Nord Stream 1 due to “preventive work” on a compressor unit. Germany has accused Moscow of using energy as a weapon. The EU is planning to have emergency action meetings with energy ministers next week to reform the European electricity market and reign in runaway prices. Next week there is plenty of economic data for the EU with major economics services PMIs released on Monday and the ECB’s monetary policy decision on Thursday.

GBP

The Aussie is trading against Pound 6 basis points lower than it’s opening at yesterday, returning to the level of 0.5879 after seeing a high of 0.5911 in the overnight session. Despite a negative economic outlook in the UK right now, small bits of data yesterday indicated better results than the pessimistic market expectations. The House Price Index was up 0.8% instead of the expected 0.1%. The final manufacturing PMI was 47.1 instead of the expected 46. These data points helped the Pound recover some of the territory gained by the Aussie. The FTSE finished -1.9% from last night’s session. A Goldman Sach’s report has warned UK inflation could move above 20% next year if gas prices remain high in the coming months. In that scenario, the GS report predicts the UK real GDP would likely shrink by 3.4% as inflation would have such a large impact on real disposable incomes. No data from the UK into the weekend.

NZD

The AUDNZD opens down from yesterday, after a small rally to 1.1209 in the afternoon, the pair fell down to opening this morning at 1.1159. Kiwi overseas trade figures were released this morning, coming in far below expected at -2.4% instead of the expected 0.2% rise. No reaction to the data so far.