US Buyers Hold On, Oversized Losses Elsewhere
AUD
The Australian Dollar was largely weaker against most major currencies however avoided carnage against the Greenback, as risk-off sentiment and inflation fears continue to run rampant in global markets. Asian equities were the only highlight across the global markets as the ASX closed up +1.4%, Nikkei up +0.9% with only the Shanghai Comp trading lower than its peers at -0.1%. Commodities showed some support for the Aussie, with Iron Ore and Copper putting on +1.2% and +2.0% respectively, Gold was trading flat. On the data front, no domestic data had been released yesterday as we’re ending the week quietly with just the Private Sector Credit m/m releasing later this morning. What might help move the needle today is China’s release of Manufacturing and Non-Manufacturing PMI’s, which are tipped to be mostly contractionary for the Chinese economy.
USD
The AUDUSD managed to hold on to the 0.65 figure even after a volatile NY session where we fell deeply back into the 0.64s before reclaiming the 0.65’s, opening at 0.6508. The Fed’s Mester and Bullard had hit the wires stating that recession won’t stop the Fed from raising rates, and that they are anxious to see the extent of global quantitative tightening affecting financial conditions respectively. Despite an anxiety-riddled Fed commentary, the US did have a supporting economic data print as the Unemployment Claims from the US had delivered better than expected, although the USD Final GDP q/q had delivered at expectations at -0.6%, confirming the start of a technical recession. With recession and inflation being the forefront of the US, Wall St had naturally been hit the hardest with the DOW closing -1.5%, S&P 500 down -2.1% (peaked at -2.9%) and the Nasdaq closing -2.8%. A headline piece of data for the week is the Core PCE Price Index m/m released tonight, it’s the Fed’s preferred gauge for inflation and is anticipated to show sticky inflation at 0.5%. Personal Income and Spending m/m and Chicago PMI also being delivered, whilst FOMC speaker Brainard is also hitting the wires tonight.
EUR
The Aussie Dollar lost some steam against the Euro overnight after some hawkish commentary from ECB speakers, leaving the pair trading at 0.6624. The Euro had regained much of its strength overnight as we open nearly a full cent lower at 0.6623 which is a 2-month low. ECB’s Simkus hit the wires saying his choice would be for a 75bps hike, and that a 100bps move would be too much now. We then heard from ECB’s Centeno, who said the ECB is still far from the neutral rate, but the frontloading QT debate may have destabilising effects. ECB’s Muller commented that inflation calls for significant rate hikes, adding that something similar to the last 2 is appropriate. European Equity markets were soured by the hawkish commentary, the DAX was down -1.7% and the CAC was down -1.5%. In data, the German Prelim CPI m/m was above expectations at +1.9% vs expected +1.5% with the Spanish Flash CPI y/y had falling over below expectations at 9.0% vs 10.1%. Looking ahead, CPI flash estimates are being released tonight along with German and Italian unemployment data. The Italians are also releasing their Preliminary CPI m/m with the Eurozone Unemployment Rate being delivered.
GBP
The Sterling had clawed back its losses that had shocked the market earlier this week as overnight the pair fell from 0.6010 down to trading at 0.5830 at time of writing. UK PM Truss said that the UK was in “a very serious situation” and that the government would start working on its fiscal plans – Kwarteng and Truss hit the wires saying that they stand by the tax cuts and global factors are to blame. The Bank of England's move on Wednesday to buy long-term bonds to restore stability appears to have calmed the market and acts as a tailwind for the British pound. No data had been released yesterday, however today a slew of lower-tier data is being released which includes the UK’s Money supply, Net Lending to Individuals m/m, Mortgage approvals, the Current Account and Final GDP q/q.
NZD
The AUDNZD has fallen from its highs, no longer holding its 1.14 handle and is currently trading at 1.1337. ANZ Business Confidence Index showed that the business outlook is now -37.6, up 25.9 points higher than the June low and rising for the third month in a row and at its fastest m/m pace since December 2020. RBNZ Orr also spoke in Lithuania but offered little to entertain markets. No other data to report on for the end of the week.