AUD Continues to Drift Lower

AUD

The Aussie dollar gave up further ground on Friday, pressured by the RBA's monetary policy stance and the Fed's hawkish posture, while the ASX closed -0.6% lower as Utilities and Energy ended down -1.7% and -1.5% respectively. Asian equities finished the day in the red as the Hang Seng dropped -1.6%, trailed by the Kospi & Shenzhen’s -0.7% loss. Friday’s RBA Monetary Policy Statement showed our central bank has boosted its inflation forecast and reduced the projected peak level of unemployment. It now sees inflation returning to 3% towards the back end of 2025. The main events this week will be Wednesday’s Wage Price Index q/q, as well as China’s Industrial Production and Retail Sales. We’ll also see the Aussie employment report on Thursday.  

USD

AUDUSD stooped to 0.6338 in Saturday’s early hours before retracing to open today at 0.6357. A positive end to the week on Wall St. saw the Nasdaq close +2.0%, the S&P 500 +1.6%, and the Dow Jones +1.2%. On Friday, US consumer long-term inflation expectations reached a 12-year high of 3.2% over the next 5 to 10 years. The combination of higher inflation expectations and concerns about the durability of consumer spending highlight a difficult challenge for Federal Reserve policymakers as they debate further interest rate hikes. Notably, the University of Michigan’s preliminary survey indicated 20% of respondents believe unemployment will cause more hardship than inflation in the coming year. No major US data to be released overnight, while late tomorrow evening we’ll see the CPI measures. Softer US price pressures and weakened consumer spending are expected to weight on the greenback, with the CPI y/y print expected at 3.3%, down from the previous 3.7%.
 

EUR

AUDEUR gave up ground over the course of Friday, then traded sideways throughout the evening to open at 0.5948. The DAX and CAC gave up -0.8% and 1.0% respectively. A quiet week ahead in terms of eurozone data, with Flash GDP q/q and the German ZEW economic sentiment arriving tomorrow evening. We’ll also see ECB President Lagarde speak on Friday evening, ahead of the Final CPI y/y release.

GBP

AUDGBP has traded sideways since mid-morning Friday, opening today at 0.5196. Friday’s UK GDP figures were a little better than expected (printing at +0.2% m/m, exp. 0.0%), but in reality, the economy has largely stagnated this year. The level of real GDP was flat relative to the second quarter, with the details revealing the economy was rescued by net imports (a category that has been pretty volatile in previous quarters). This evening, MPC Member Breeden will speak at a conference in London, while markets await tomorrow’s Claimant Count Change and Average Earnings Index 3m/y. The major event this week will be Wednesday’s CPI release.
 

NZD

AUDNZD has furthered November’s pullback over the weekend to open at 1.0787 (well-under the 1.0945 peak on November 2, yet much higher than the 1.06 territory we saw in October. This morning’s BusinessNZ Services Index printed at 48.9, showing the sector went back into contraction in October. Despite this, the proportion of negative comments stood at 58.2%, down from 61.8% in September. No major data releases for the Kiwis this week.