FOMC Meeting Minutes to Spotlight Dot Plot Revision

AUD

The Aussie dollar opens mixed against majors while the ASX closed +1.0% higher with utilities outperforming and tech strong. Asian equities also gained ground with the Nikkei adding +2.4% and Hang Seng +0.8%. Little reaction to yesterday’s NAB Business Confidence release, although the survey continues to point towards ongoing resilience in business activity with conditions down slightly in September, but remaining above average at +11 index points, where the index has hovered since May. Quiet on the data front moving forward, although we’re looking out for the tentative New Loans announcement from China as the government considers raising the budget deficit for 2023, potentially unleashing a new round of stimulus to jolt the economy into growth. The consideration marks a shift in Beijing’s stance as the government has so far avoided broader fiscal stimulus despite a deepening property crisis and mounting deflationary pressures. Given the China-related risk premium believed to be priced into the Aussie dollar at the moment, any noteworthy action or commentary from China could provide meaningful movement for AUD currency pairs.

USD

AUDUSD has found comfort in the 0.640 handle for the time being, reaching further overnight to open today at 0.6431. Wall St. remained well supported overnight with the NASDAQ closing +0.7%, the S&P 500 +0.6% and the Dow Jones +0.4%. Little in the way of meaningful US data releases with minimal reaction to the marginally weaker-than-expected small Business Confidence data and as-expected Wholesale Inventories data. FOMC Meeting Minutes will be released tonight with markets likely to focus on what led the FOMC to increase the end-24 and end-25 dots relative to June. During the press conference Fed Chair Powell disclosed that it’s possible that the neutral rate is higher than the FOMC median (2.5%) and referenced some participants had raised their estimates. We’ll also se US Producer Price Inflation with the Core figure expected +0.2% m/m, in line with the previous release.

EUR

AUDEUR opens at 0.6064, being relatively flat compared to yesterday’s open, after trading a range of 0.6080 to 0.6039 within the past 24h. The DAX and CAC each gained +2.0%, marking the biggest day in nearly 1 year as dovish commentary from the US Federal Reserve policymakers and easing oil prices helped ease investor nerves after conflict in the Middle East had sparked a rush to safe assets. ECB President Lagarde didn’t deliver anything of note overnight, while the quiet 24h ahead leaves us looking to tomorrow’s ECB Monetary Policy Meeting Accounts, providing a detailed record of the Board’s most recent meeting where the Main Refinancing Rate was hiked by 25bps to 4.5%.

GBP

Mixed trading for the AUDGBP over the past 24h, having reached 0.5250 highs yesterday afternoon before retracing to 0.5219 in the early hours before climbing back o open at 0.5236. Notably, the FTSE gained +1.8% despite the Bank of England Meeting Minutes indicating persistent inflation, higher interest rates and geopolitical tensions are significantly impacting on the current risk outlook. Little data today ahead of tomorrow’s monthly GDP print.

NZD

AUDNZD has furthered the past month’s downward trend, steadily declining throughout the early hours before bottoming out at 1.0617, then retracing to open at 1.0637. No meaningful data from our Kiwi friends this week, although Friday’s BusinessNZ Manufacturing Index should provide insight into the relative level of business conditions including employment, production, new orders, prices, supplier deliveries and inventories.