AUD Fails to Hold Gains in Overnight Session

AUD

The Australian Dollar had a turbulent 24-hour session, reversing early gains with late losses, but currently managing to trade at the same levels seen at yesterday morning’s open, if not slightly lower against the Pound and Kiwi. Asian equities were mixed on the close with the CSI300 +1.3% and Nikkei -0.1%. The ASX was the worst performer, finishing Thursday’s session down -0.5%, in a broad-based decline lead by utilities that fell -2.7%. Commodities were mainly mixed with Gold losing out -0.8% whilst Iron Ore put on +0.1%. With no data released yesterday, today’s main local event will be the release of the Statement on Monetary Policy. It is expected that the statement could hawkish given the stronger underlying inflation in Q4. Elsewhere in Asia, Japan's Prime Minister Kishida is expected to name BOJ Governor Kuroda's successor next week. Speculation revolves around whether Kishida will choose a more aggressive leader for the central bank that will end the ultra-loose monetary policy.

USD

The AUDUSD started off stronger reaching a weekly high of 0.7011 overnight before surrendering the 0.7 handle in late trade, trading at 0.6934 currently. Wall Street lost ground throughout the day and saw losses of around -0.5% by end of trade. The Greenback suffered as US weekly Jobless Claims were a little worse than expected with initial claims rising to 196k against forecasts of 190k, while continuing claims rose to 1.688m against forecasts of 1.660m. Later, the US Dollar benefited from higher government bond yields but also from comments from Richmond Federal Reserve President Thomas Barkin, who said that the effects of the Fed's policy tightening has been substantial while adding, “it’s important to continue hiking to ensure inflation comes back to the target”. Tomorrow morning will see the University of Michigan’s Consumer and Inflation Sentiment Index.

EUR

The AUDEUR also saw initial strength up to 0.6497 before tailing off late in the evening, now sitting at 0.6457. European equities were largely higher on the open with the Eurostoxx 50 +1.2% and DAX +0.7%. Little to entertain European markets, though preliminary readings suggest the inflation rate in Germany is expected to be +8.7% in January 2023. It is measured as the change in the consumer price index compared with the same month a year earlier. The Harmonised Index of Consumer Prices (HICP) reading is expected to be 9.2%, with the harmonised reading differing to CPI because all the countries in the European Union follow the same methodology for HICP. EU Economic forecasts are due out at a tentative time in coming days, with the forecasts looking ahead 2 years for EU member states.

GBP

The AUDGBP off the ball and losing out just slightly, although comfort is being found above the 0.57 figure, currently at 0.5717. There was a landslide of differing opinions from BoE members overnight. Policymaker Silvana Tenreyro noted that just a fifth of rate rises have been felt by the UK economy in her view, rates are now too high, and a massive recession would be needed to push inflation down to 2%. She finally added she would consider a rate cut. BoE’s Bailey countered saying that the BoE needs to see more evidence inflation will slide and be sustainably at 2%. BoE’s Pill commented that the BoE needs to guard against too many rate rises. UK GDP for Q4 in 2022 released this evening is likely to paint a fairly bleak picture of the UK economy, and if a negative forecast and print of -0.3% does come to fruition, the UK will enter a technical recession after the Q3 reading of -0.3%.

NZD

The AUDNZD lost some ground even with minimal data out of the Kiwis, trading at 1.0964 right now. This mornings BusinessNZ Manufacturing Index improved to 50.8 from 47.8 at the last December finalised reading. No real reaction to the data. The manufacturing index is followed up by the BusinessNZ Services Index early Monday.