Hawkish Powell Bolsters Greenback
AUD
The Aussie dollar once again opens down against all of the majors, having lost all the ground it gained in the opening of the week. The ASX finished 0.3% higher as 0.5% gains in Financial & Mining stocks offset IT’s 4.8% loss. There was no major domestic data yesterday, while major Chinese CPI and PPI figures (-0.2% y/y and -2.6% y/y respectively) confirmed China has re-entered disinflationary territory in October, with continued weak consumer spending and a worsening slump in the manufacturing sector. This trend was also evident in China's trade figures earlier this week, which showed exports sinking more than expected, while imports unexpectedly grew. Today, the RBA will release their Quarterly Monetary Policy Statement which sets out the Bank's assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth. More hawkish than expected would be good for the Aussie Dollar. There’s no further domestic data until next week.
USD
AUDUSD traded to a high of 0.6421 in the overnight session until about 3am AEST where we saw a very sharp dip to open up at 0.6367. Wall St. was weaker overnight closing with the S&P 500 down -0.8%, Dow down -0.7%, and the Nasdaq down -0.9%. The US had their weekly jobless claims which were largely as expected with initial claims dropping slightly to 217k to marginally beat estimates of 218k. Some hawkish comments came from FOMC Chair Powell that saw the USD dollar push higher, notably stating that they will not hesitate to tighten more if appropriate, and that they are not confident they have achieved a stance to hit 2% inflation. Tonight, they have the University of Michigan Prelim Consumer Sentiment expected to decrease slightly to 63.7 from its previous 63.8 level, indicating a slight loss in financial confidence for consumers.
EUR
AUDEUR traded relatively flat throughout the day before an overnight plunge down to open up at 0.5969. The European markets added to their gains with the DAX gaining 0.8% and the CAC ending the session +1.1%. No major data last night for the Eurozone, but they did have ECB President Lagarde speaking at the Eurogroup meeting in Brussels where recent economic developments and Euro-area competitiveness were discussed. She will be speaking again at a fireside chat at the Financial Times' Global Boardroom at 11:30pm tonight, so some volatility in the AUDEUR could occur.
GBP
AUDGBP had a mixed session yesterday, having traded to lows of 0.5207 before rising to a high of 0.5232 before falling again to open up at 0.5210. The FTSE initially dropped last night before recovering to close up 0.7%. There was no major data yesterday for the Brits aside from BoE Chief Economist Pill stating that the BoE expected to maintain restrictive rates for an extended period, although would not make any promises. At 6pm tonight they have their GDP m/m expected to come in at 0% - slightly down from its previous 0.2%. Notably, the Bank of England have projected stagnant conditions in 2024 & have reiterated it's too soon to be talking about interest rate cuts. Regardless, swap pricing currently reflects market beliefs of a cut in Q2 2024.
NZD
AUDNZD kept its downward trend to open up at 1.0800, once again furthering the steady decline since last Thursday’s 4-month highs of 1.0943. There was no major data yesterday for the Kiwis. This morning they had their BusinessNZ Manufacturing Index come in at 42.5 down from it’s previous 45.1 though there was no real effect on the exchange rate. The next major event will be the RBNZ interest rate decision in late November.