AUD Advances After Dovish Fed Pause
AUD
The Aussie dollar opens up across the board, following the US Fed’s dovish comments for 2024 – inviting strength for more risk-on currencies like the AUD. This was slightly softened by Chinese New Loans Data coming out less than expected, with the People’s Bank of China expecting 1.3T CNY-denominated loans issued in November, although fell short at 1.09T. Onto equities, the ASX closed +0.3%, Nikkei +0.3% and Shanghai Comp -1.2%. Commodities opens green with Natural Gas +3.4%, Crude Oil +1.3%, Silver +3.9% and Gold +1.7%. Today at 11:30am we have Australian employment data to release, expected to be broadly flat, following October’s strong result due to temporary referendum hiring. Tomorrow, China will release their Industrial Production y/y, expected to add 1.1% from last month to +5.7%.
USD
AUDUSD opens higher at 0.6660, having rallied over 1.5% earlier this morning after the Fed held interest rates steady with a surprise dovish spin. The policy rate remained unchanged at 5.50% for the third consecutive meeting, with another 25bps of cuts added to the FOMC's dot plot projections, bringing the total to 75 bps of projected cuts in 2024 (against the 50 bps from the September meeting). Fed Chair Powell's inflation outlook remains positive, stating: “inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news.” The dovish FOMC meeting spurred equities higher with the Nasdaq trading +1.2%, the S&P 500 +1.1% and the Dow +1.0%. Tonight at 12:30am we have US Retail Sales and Unemployment Data coming out, all expected to remain flat from last month with the exception of Core Retail Sales m/m, expected to lose 0.2% to -0.1%.
EUR
AUDEUR opens higher at 0.6125, despite few market-moving data coming out of the Eurozone yesterday. Last night they had Industrial Production m/m miss by 0.4%, coming in at -0.7% against the expected -0.3%, indicating lower output from manufacturing, mining and utilities. For the Euro’s equities, the DAX & CAC each fell -0.2%. All eyes will be on the ECB’s Main Refinancing Rate at 12:15am Friday, expected to hold at 4.50%, and all ears will be on their Monetary Policy Statement to see if they will follow the Fed’s footsteps in rate cuts for 2024. With Eurozone inflation declining to +2.4% y/y in November, as well as a fall in the core measure, investors have increased their bets of ECB rate cuts next year, especially after one of the more hawkish board members, Isabel Schnabel, labelled the CPI slowdown as 'remarkable' and 'a pleasant surprise'.
GBP
AUDGBP opens higher at 0.5274 after a series of weak data coming out of the UK last night. Most notably, GDP m/m decreased by -0.5% from last month, to -0.3% – whilst missing expectations of just -0.1%. Manufacturing data and Good Trades Balance also followed suit, majority decreasing from last month, whilst missing expectations to be worse than expected. The FTSE gained +0.1%. Big news will be for the Bank of England Official Bank rate and Summary, expected to hold at 5.25%. Again, markets will look for signs of rate cuts in 2024, much like the US Fed have indicated.
NZD
The AUDNZD opens higher at 1.0779, inching higher off the back of weak GDP q/q figures this morning. GDP was previously +0.5%, expected at +0.2% today, but fell short at -0.3%. Yesterday, NZD Current Account came in slightly positive, at -11.47B against the expected -12.15B. No more data coming out of NZ until next week, where Westpac Consumer Sentiment and Business NZ Services Index will be released.