AUD On Firm Footing to Start the Year
AUD
A new year kicks off with continued focus on central banks and inflation, as well as on signals of how long and deep a recession are we heading into. For inflation pressures to cool off, further tightening of financial conditions and weaker economic activity is still needed. Asian equities were higher on the last trading day of the year, with the Hang Seng up 0.5% and Nikkei +0.1%. The ASX gained 0.3% to close with an annual loss of 5.5% for the benchmark. A decent session yesterday for commodities, with Gold gaining 0.5%, Silver up 0.3%, Iron Ore flat (gaining 0.1%), and Copper dead flat. Global market trading properly kicks into gear today, with the latest insight into how China's manufacturing sector closed last year likely to set the tone for the day ahead in Asia. China's Caixin manufacturing purchasing managers index for December is expected to remain in recessionary territory for a fifth straight month, falling to 48.8 from 49.4 in November. This follows official PMI data at the weekend that showed the sharpest pace of contraction in December in nearly three years as COVID-19 infections swept through production lines after Beijing's abrupt reversal of anti-virus measures. Commodity Prices y/y also due out this afternoon, with a previous result of 19.1%. Looking ahead, no heavy-hitting data for the rest of the week.
USD
AUDUSD edged higher on the first trading day of the year, despite thin volumes and discouraging Chinese news, fighting to hang onto the 0.68 handle and successfully doing so, trading at 0.6802 at time of writing. In equities, the Dow down -0.2%, the S&P down -0.3%, and the NASDAQ down -0.1%. Chicago PMI for December rose to 44.9, up from 37.2 and printing well above expectations of 40.0. The USD moving off its lows in response with flows mixed into the month and year end with liquidity a little thinner than usual. On Wednesday, the focus will be on the US Manufacturing data, JOLTS Job Openings and FOMC minutes.
EUR
AUDEUR trades higher this morning, having flirted with the 0.64 handle before cooling off to trade at 0.6380 this morning. A stellar result in equities, with the DAX up 1.1%, and the CAC up 1.8%. The week started with December manufacturing PMIs being released from the Euro area. Final Manufacturing Data for Europe came in on expectations of 47.8. The intensity of the Eurozone Manufacturing sector downturn eased in the final month of 2022 as softening inflationary pressures and more stable supply-chain conditions created some respite for goods producers. Weakness in client demand remained evident through slumping new order intakes, leading firms to make further inroads into their backlogs instead. Meanwhile, additional increases in pre- and post-production inventories were seen during December despite purchasing activity and production volumes falling. In other news, Croatia joined the Euro on 1 January. Looking ahead, today we will see German Prelim CPI data expected to come in at -0.6%.
GBP
AUDGBP trades higher this morning, briefly losing the 0.56 handle early on in the session before recovering to reach over 6-week-highs of 0.5659, then reversed some of its gains and now trades at 0.5645 this morning. In equities, the FTSE lost out -0.8%. There were reports that the UK may halve their energy support package from April with the UK’s Hunt poised to announce a £20B energy support package. In data, today we will see Final Manufacturing PMI out of the UK, tipped to come in at 44.7.
NZD
The AUDNZD pair has advanced decently over the Christmas period and trades higher this morning, having reached highs of 1.0790 not seen since the 1st December last year, before coming off the boil to trade at 1.0768 at time of writing. A quiet day out of Kiwi land, as today will be a bank holiday for them also. Tomorrow, the GDT Price Index will come out, with a previous result of -3.8%.