US Dominance Continues
AUD
The Aussie Dollar continues to have varied performances as negative risk sentiment continues to sweep through markets globally. The ASX finished Monday’s session down -1.6% driven by heavy losses across the energy and material sectors, while other Asian equities finished in the red with the Nikkei underperforming its peers, down -2.7%. In commodities, Iron Ore prevailed up +0.6% within a sea of red. Gold -0.5%, Silver -1.4% and Copper -1.6%. No local data today, while tomorrow’s Retail Sales (m/m) could give some early indication whether the RBA’s decision to switch to smaller rate hikes was correct. No major news or data from China to report on either.
USD
The AUD/USD remained under pressure overnight alongside the broader USD-bid theme, which saw it reach 2y lows of 0.6438. It opens today at 0.6458 as the almighty Greenback continues to dominate global currencies. Wall St saw further losses overnight with the S&P 500 and the Dow Jones closing -1% and -1.1% respectively, while the NASDAQ finished the session -0.6%. Overnight, Boston Fed Speaker Collins exclaimed further rate hikes are necessary to bring inflation to target, while acknowledging the trade-off for slowing inflation will be slower employment growth and a higher unemployment rate. The Fed’s balancing act will likely focus on the lesser of two evils. Looking ahead, Fed Chair Powell is set to take part in a panel on digital currencies, hosted by the Bank of France, in Paris. In upcoming data, Durable Goods Orders (m/m) is expected to come in +0.3%, potentially signaling further inflation, while the US House Price Index is expected to be flat relative to last month.
EUR
The AUDEUR opens this morning at 0.6721 off the back of what ECB’s Lagarde describes as a ‘darkening’ economic outlook. She indicated supply constraints continue to generate price pressures and that ‘several’ further hikes are expected to dampen demand and guard against the risk of a persistent upwards shift in inflation expectations. She added that the ECB wants to reach neutral levels before determining the need for further tightening, and that quantitative tightening would only be considered once this was complete. European equities closed in the red with the DAX and CAC down -0.5% and -0.2% respectively. To the day ahead, yearly M3 Money Supply data is expected at +5.4%, providing means for the past year’s inflation-driving spending, while Private Loans are expected in at +4.5%.
GBP
The AUDGBP touched 6-year highs of 0.6242 yesterday before it retreated back in line with yesterday morning’s open, at 0.6036. The FTSE100 managed to survive the Global Equities bloodshed, remaining even on the day. After the weekends tax-cut shake-up, BoE Govenor Bailey said that the BoE was monitoring developments in financial markets closely and would make a complete assessment at its next meeting. He added that they ‘would not hesitate’ to change rates as much as was needed. Looking forward, MPC Member Pill is due to speak about economic and monetary policy challenges at the International Monetary Policy Forum in London this evening. Some volatility may be experienced as audience questions are expected to be hosted. No data out today, ahead of tomorrow’s British Retail Consortium Shop Price Index (y/y). This indicated the change in price of goods purchased at retail stores, which have been increasing since January 2021.
NZD
The AUDNZD opens this morning at 9-year highs of 1.1422 after reaching 1.1463 overnight. Lack of economic data from the Kiwis keeps markets leaning towards market sentiment and US dollar dynamics. No data today as we expect the ANZ Business Confidence diffusion index to be released tomorrow morning.