Renewed Global Recession Fears Topple AUD
AUD
The Aussie dollar saw a steep drop against all major currency pairs off the back of a risk off environment stoked by recessionary fears, opening lower across the board this morning. Asian Equities were mixed on close last night with the ASX +0.1%, Nikkei +2.5% and the Shanghai Comp Flat. Similarly commodities were also mixed with, Crude Oil -0.9%, Natural Gas +2.1%, Gold -0.1%, Silver +0.1% and Iron Ore +1.5%. Although there was no local data yesterday we saw China’s Foreign Direct Investment ytd/y numbers fall from 9.9% to 6.3%. To the day ahead, we await MI Inflation Expectations, along with some employment figures in the form of Employment Change which is expected to drop from 64K to 26.5K and the Unemployment Rate which is expected to remain flat at 3.4%.
USD
After firmly reclaiming the 70’s handle, highs not seen since mid-august, the AUDUSD pair slipped in the early hours of the morning, opening considerably lower at 0.6939. Hawkish Fed commentary helped the greenback with Bullard and Mester both predicting rates would need to be above 5% and remain there to bring inflation back to target, contradicting any indications of easing inflation and a slowdown in rate hikes. As a result, all US Equities closed lower with Dow Jones -1.3%, S&P 500 -1.1% and NASDAQ -0.8%. Despite no major market reaction, and although Core PPI m/m remained flat at 0.1% the US saw some heavy data misses with Core Retail Sales m/m missing by 0.6%, PPI m/m missing by 0.4% and Retail Sales m/m missing by 0.3%. We also saw mixed results in low and mid-tier data, which again saw no response from markets. Today we have FOMC Member Logan Speaking, tonight we will see the Philly Fed Manufacturing Index, Unemployment Claims, FOMC Member Brainard Speaking.
EUR
After momentarily reclaiming the 65 handle overnight, the AUDEUR saw a steep drop of over 70 basis points, opening this morning lower at 0.6434, likely a response to renewed recession fears in the US causing a broader sell of the AUD and risk assets. European Equities showed little to no reaction to this with Dax closing flat and CAC 0.1% higher. Last night we saw the eurozone’s Final CPI and Final Core CPI y/y coming in bang on expectations at 9.2% and 5.2% respectively. We also saw Italian Trade Balance beat expectations of -1.80B coming in at 1.45B which sparked little market reaction. Last night ECB’s Villeroy confirmed Lagarde’s guidance of a 50bp hike at the next meeting is still valid, however retreated from Tuesday’s headline of a predicted 25bp hike in March, saying that it is still too uncertain to predict that far ahead. He said that the ECB will reach terminal rates by summer, and stay there ‘as long as necessary’, returning inflation to goal by 2024/25. On the cards tonight we have the Current Account being released and ECB President Lagarde Speaking along with ECB Monetary Policy Meeting Accounts.
GBP
The AUDGBP pair saw a range of almost 90 basis points in the overnight session, opening lower this morning at 0.5622. British Equities saw minor losses with the FTSE falling 0.3% on close. UK Core CPI rose to 6.3% y/y in December, coming in higher than expectations of +6.2%. CPI y/y came in 0.2% lower than previous readings bang on expectations of 10.5%. RPI y/y had a slight miss coming in 0.2% lower than market expectations of 13.6%. Not much on the cards for the GBP in the session ahead with only RICS House Price Balance and BOE Credit Conditions Survey to look out for.
NZD
We open lower this morning at 1.0770 against our Kiwi counterparts, a steady decline yesterday saw the Aussie dollar sink to 2 week lows. This morning we saw FPI m/m increase 1.1% indicating a rise in the price of food and food services purchased by households in New Zealand. Nothing on the cards for the rest of the day, but to keep an eye out for tomorrow we have Business NZ Manufacturing Index and Visitor Arrivals m/m.