Central Banks Hit and Miss, Aussie Mixed

AUD

A series of central bank meetings across the globe saw the Aussie Dollar having an extended period of volatility whilst the nation had a mid-week holiday, with a mixed outcomes against the major currency pairs. Asian Equities were down across the board with the Shanghai Comp -0.3%, Nikkei -0.6% and the ASX underperforming -1.6%. Commodities were mixed with Gold +0.2%, Silver -0.2%, and Iron Ore +0.8%. Deputy RBA Governor Michele Bullock spoke on Wednesday and said there are problems in the global economy that could threaten Australia's recovery, though her comments were overlooked in anticipation for litany of Central Bank meetings. It was quieter on the data-front yesterday with CB Leading Index m/m coming in at 0.4% previously at 0.6%. To the day ahead we have the Flash Manufacturing PMI previously at 53.8, and the Flash Services PMI previously at 50.2.
 

USD

The AUD/USD sunk to new recent lows not seen since April 2020 before parring some earlier losses to trade at 0.6645, still down since on Wednesday morning. US Equities were in the red across the board with Dow Jones -0.4%, S&P 500 -0.8%, and NASDAQ -1.4% losing out after the FOMC Meeting. In the early hours of Thursday morning, The Federal Reserve announced a 75bp rate hike, in line with market expectations and spurring on the Greenback. Commentary from the FOMC provided the Fed’s most resolute messaging to date on their willingness to do whatever it takes to battle inflation. Chair Jerome Powell acknowledged this by admitting some economic pain would be necessary to moderate inflation back to target. What really bolstered the US Dollar was the change in FOMC Dot Plot expectations, which showed the median rate at the end of 2022 at 4.4%, up from 3.4% in June 2022. Other US data from Thursday included the Current Account & Unemployment Claims which both came in better than forecasted, adding to the mounting US dollar strength. To the day ahead more important data to keep an eye out for include the Flash Services & Manufacturing PMI’s which both have potential to further strengthen the greenback.

EUR

The AUD/EUR also saw a quite volatile session over the public holiday, hitting lows of .6692 before bouncing back and opening higher this morning at 0.6755. European Equities also saw a drop as rate hikes loom around the world, the CAC -1.8% and the DAX -1.9%. ECB’s Schnabel hit the wires saying inflation may accelerate further in the short term, with Germany likely suffering a recession on gas dependency. He continued commenting that the Euro-zone economy is likely to stagnate not shrink. Also out of the Euro area yesterday saw the Swiss National Bank with the SNB Policy Rate raised, with its benchmark interest rate moved higher in line with expectations of 0.5%, previously being at -0.25%. We have a data heavy day ahead for the eurozone with the German and French Flash Services and Manufacturing PMI’s, and the Eurozone’s Flash Services and Manufacturing PMI’S.
 

GBP

The AUD/GBP taking a steep climb to reclaim the 0.59 handle overnight, despite the BoE raising interest rates to the highest level since 2008. The BoE and MPC voters were 9-0-0 in favour of a rate hike, the bank's seventh straight rate hike since December though less than some forecasters expected. The rate moved by 50bp to 2.25%, with 5 BoE officials voted for 50bps, 3 for 75bps and 1 for 25bps, showcasing a more hawkish skew. Inflation concerns remain after Britain's economy slid by 0.1% in the third quarter of 2022, but that decline was considerably lower than the 0.4% dip that many predicted. Today we have potential for market movement with MPC Members Tenreyro & Haskel hitting the wires, followed by the Flash Manufacturing and Services PMI’s later in the afternoon.
 

NZD

The AUD refreshed highs against the Kiwi not seen since August 2015, opening up at 1.1361 Yesterday we saw the Westpac Consumer Sentiment coming in at 87.6, previously being at 78.7 and Trade Balance coming in under expectation at – 2447M previously being at -1406M. There is no further macroeconomic news from New Zealand until RBNZ Governor Orr later next week.