Aussie GDP Firm Despite Rite Hikes, For Now

AUD

The Australian Dollar trades with mixed results this morning as various risk-related geopolitical events develop around the world (China lockdowns, Gas supply to Europe, Russia/Ukraine). Asian Equities fell short on Wednesday as the Nikkei closed -0.7% lower and the Hang Seng index dipped -0.8% on the close. Domestically, the Australian Share Market fell -1.4% as energy stocks weighed down heavily on the index. On the data front, mixed Gross Domestic Profit (GDP) data landed at 0.9%, lower than expectations of 1% but was above the prior release of 0.8% on a quarterly basis. More importantly, the annual data had improved to 3.6% against the estimates and the prior print of 3.5% and 3.3%. Going forward, investor’s attention will be focused on Governor Lowe as he speaks today at the annual Anika Foundation event. Lowe will discuss the rationale behind stepping up the OCR by 50 basis points consecutively for the fourth time.

USD

AUDUSD advanced higher overnight as the US dollar trimmed back recent strength, rebounding firmly from the 0.67 handle and trades at a rate of 0.6764 this morning. US Equities gained positive momentum at the close with the Nasdaq climbing +2.2%, the S&P +1.8% while the Dow Jones finished closely at +1.4%. The US 10-year slipped 0.5% lower to 3.33%. Oil continued its descent with WTI Crude down 1.6% at $85.60 a barrel. To the data overnight, the Fed’s Beige Book indicated that the economic activity was largely unchanged since June with some districts reporting mixed results. Apart from that, inflation pressures are displaying exhaustion signals. This evening, market participants will focus on the US with the Fed Chairman Powell to speak at a monetary policy conference at the Cato institute with a Q&A to follow.

EUR

AUDEUR bears continue to dominate the Australian Dollar, printing a fresh one-month low of 0.6760 at the time of writing. European Equities closed with relatively subdued results as the German DAX dipped -0.3%, while the French CAC closed with next-to-no movement at 0%. To the data overnight, the Euro economy expanded more than initially expected as the GDP rose by 0.8% for the second quarter of 2022, propped up by consumer and government spending. On the other hand, the contribution by external trade was negative, since both exports and imports went up by 1.3% and 1.8%, respectively. Later this evening, the European Central Bank (ECB) will reveal its monetary policy decision, with most analysts expecting a 75-bps rate hike as CPI inflation hit another record high, there are talks of double-digit territory by mid next year.

GBP

AUDGBP gained positive momentum overnight and marched toward the 0.59 handle, reaching highs of 0.5881 before coming back to trade at 0.5859 this morning. UK’s FTSE 100 index fell on Wednesday as weak oil prices and metal prices pressured the commodity-backed index, the blue-chip index fell -0.9% on the close. Across the wires overnight, BoE’s Huw Pill said Goldman’s Call for 22% inflation in the UK was completely plausible and Member Mann said forceful rate moves may allow a pause or a reversal. More importantly, The BoE’s Bailey said that it is Russia not the BOE that will cause the UK recession. Currently, money markets are betting on the upcoming hike next week, split evenly between 50bps and 75bps.

NZD

AUDNZD trades at a loss this morning, continuing its pullback from recent 5-year highs as the pair trades at a rate of 1.1136. In lower tier data this morning, manufacturing sales fell -3.8% QoQ, $1.3 Billion, following it’s recent rise in the March Quarter. In the absence of any market moving Kiwi data, markets remain highly focused on offshore factors such as the Fed Chair Powell’s speech ahead of the US Consumer Price Data next week.