AUD Surges Into the New Year

AUD

AUD volatility was high last night as it dominated firmly against most other currency pairs. Asian equities were largely higher on the close with the Hang Seng outperforming its peers up +3.2%, while the Nikkei started the year down 1.45%. The ASX finished Wednesday’s session 1.6% higher, with tech and financial sectors leading the gains. Mixed performance for commodities with Gold +0.7%, Silver -1.1% and Iron Ore -0.5%. There was no AUD or CNY data yesterday, however we do have China's Caixin Services PMI come out this afternoon as well trade balance data tomorrow. Worth noting overnight that Chinese authorities yesterday discussed a partial end to the Australian coal ban which was responsible for some of the AUD gains and could foreshadow a further thawing of AUS-Sino relations.

USD

There were fireworks yesterday for AUDUSD as we moved up 150 pips reaching highs of 0.6884 before retracing down slightly to 0.6839. All 3 US equities pushed higher with Dow Jones +0.2% SP500 +0.3% and NASDAQ +0.7%. US ISM Manufacturing for December printed at 48.4, down from 49.0 and just below expectations of 48.5. Other data was mixed however with Employment up to 51.4 from 48.4 while New Orders fell to 45.2 from 47.2. Prices Paid fell for the 9th straight month, dipping to 39.4 from 43.0 to come in well below expectations of 42.9. The FOMC minutes showed that Fed officials were wary of an “unwarranted” easing in financial conditions with the risk that inflation could be more persistent than thought. Ongoing rate hikes would likely be appropriate with no participants expecting rate cuts in 2023. They also cited the need for policy flexibility. Fed’s Kashkari on the wires saying that he favoured raising rates a at least at the next few meetings and that it was too soon to be certain that inflation had peaked with rates potentially needing to go even higher. There is no significant data for the remainder of the day however we have the official Non-Farm Employment report tomorrow.

EUR

Solid upwards momentum for AUDEUR as we pushed to a high of 0.6482 before retracing slightly down back to 0.6445. European equities were higher on the open with the Eurostoxx 50 +0.75%. Overnight France's consumer inflation data showed improvement, contracting for the month of December. Final European PMI’s were also released with the results generally better than expected. French Services was revised up to 49.5 from 48.1 with Composite up to 49.5 from 48.1. German Services was revised up to 49.2 from 49.0 with the Composite up to 49.0 from 48.9. EU Services rose to 49.8 from an initial reading of 49.1 with the Composite up to 49.3 from 48.8.  Tonight we have PPI m/m data as well Italian Prelim CPI data expected at 0.2%.

GBP

Big swings for AUDGBP overnight reaching highs of 0.5707 and lows of 0.5638 before sitting currently at 0.5670. The FTSE100 closed up +0.3%. The UK missed heavily with all its data expectations last night. M4 Money Supply m/m printing in at -1.6% from a +0.2% expected. Mortgage approvals also missed by 8k printing at 46k from 54k expected. Tonight, we have Final Services PMI data expected at 50.0, however a relatively quite week looking ahead for the UK.

NZD

AUDNZD continued its uptrend reaching highs of 1.087 which is 6 week highs before retracing back slightly to 1.0857. The New Year’s data drought continues with no data being published from New Zealand until next Wednesday.