AUD Starts Week on Front Foot
AUD
The Aussie dollar opens up mostly strong across the board this morning. The ASX gained +0.9% on Friday with outperformance in the materials sector, while Asian equities were mixed with the Shanghai Comp at -0.6% and Nikkei up +0.9%. Last Friday we had both Flash Manufacturing and Services PMI’s come out above previous levels at 47.9 and 47.6 respectively, being slightly higher than the previous figures, although indicating Australia's private sector continues to contract given softened demand. On Friday we had the Chinese Industrial Production y/y which came in higher than forecasts at +6.6%. Bank of America’s Greater China Economist Ming Quyang made and interesting point, “If you look at the whole set of data, it still shows that domestic demand is still on the weak side and the Chinese Government still needs to do more to stabilize the economy.” A quiet day for the Aussie ahead with all eyes being on the Monetary Policy Meeting Minutes out at 11:30am tomorrow.
USD
AUDUSD opens at 0.6698, being flat relative to Friday morning, although up from Saturday's 0.6662 lows. On Saturday we had the Empire State Manufacturing Index which came in below forecast of 2.0 at -14.5, reflecting a decline in business activity within the New York state. We also had the Flash Manufacturing and Services PMI’s release on Saturday which came in mixed at 48.2 and 51.3 respectively. Lastly, the Industrial Production m/m printed short at 0.2% from forecasts of 0.3% where the Fed mentioned some key statistics “Auto output jumped 7.1%, after plunging in the prior month due to the United Auto workers’ strike, manufacturing production fell 0.2% excluding the auto sector and capacity utilization edged up 0.1 points to 78.8%." A quiet start to the week for the US, with all eyes being on Friday's Core PCE Price Index data.
EUR
AUDEUR opens at 0.6148, recovering from most of Friday's losses which saw 0.6088 lows. The DAX closed flat, while the CAC was up 0.3%. On Friday, we had the Main Refinancing Rate hold at 4.50% where the ECB switched language around inflation from describing it as “expected to remain too high for too long,” saying instead that it will “decline gradually over the course of next year”. Following this we had the ECB Press Conference where Lagarde mentioned “We believe that there is still work to be done; that 'can be in the form of holding”, further strengthening the Euro. To close off last week we had mixed German and French Flash Manufacturing and Services PMI’S. Today we have the German IFO Business Climate with forecast at 87.6.
GBP
AUDGBP opens stronger at 0.5273 after recovering over 50bps from Friday’s decline, still retracing aggressively off the back of the Bank of England interest rate announcement and Monetary Policy Statement last week. The FTSE ended the session down at -0.9%. On Friday we had Gov Bailey speak at the Bank of England where he mentioned “I hope we are at the top of the rates cycle”. We also had Flash Manufacturing and Services PMI’S which came in mixed where the News Release makes mention that “UK private sector output growth edges up to a six-month high, led by a faster recovery in the service economy”. Today, we have MPC Member Broadbent speak at the London Business School, not expected to move markets, all eyes are now on the CPI which will release this Wednesday.
NZD
AUDNZD opens at 1.0791, pulling away from the 1.08 handle achieved later last week. Last week we had the GDP q/q which printed at -0.3% which came in short of forecasts of +0.2% where speculators mention “New Zealand's agriculture-rich economy contracted unexpectedly in the third quarter, raising questions about whether interest rates have been risen too far with the economy on track for a return to recession”. No data for the Kiwi today with a quiet week ahead with low tier data scattered throughout the week.