Cracks Appearing in Aussie Labour Force Data
AUD
AUD trades down or flat against its counterparts, with dismal jobs data yesterday and an increase in the Unemployment Rate both contributing to the poor performance of the Aussie, further damage to the AUD was likely avoided by strong commodities performance. A varied session for equities, with the ASX posting 0.8% gains, the Nikkei was up 0.7%, and the Shanghai Comp was down -0.7%. In commodities, Gold and Silver were flat for the second day in a row. Iron Ore posted gains of 0.8%, and Copper blew the rest out of the water with solid gains of 2.6%. In data yesterday, MI Inflation Expectations came in at 5.1%. We also had employment data, with indicating a -11.5k loss in jobs. Unemployment Rate data came in at a shocking result. With a previous print of 3.5%, it increased 0.2% to 3.7%. This will have an impact on RBA monetary policy planning and government fiscal policy decisions moving forward. RBA Gov Phil Lowe crossed the wires this morning, stating “The board is conscious there are risks in both directions.” He also mentioned the RBA “Will do what is necessary to make sure that inflation returns to the target range.” This rhetoric from Lowe indicates a preference towards overtightening, rather than treading too lightly with hikes, which may lead towards deflation and a recession.
USD
AUDUSD is down modestly, despite having plummeted to lows of 0.6836 overnight, almost 6-week-lows, before the bleeding ceased and the pair rapidly advanced within the same hour, trimming its losses and opening at 0.6873. A much weaker session in equities out of the US, with the Dow, the NASDAQ, and the S&P suffering losses of -0.5%, -0.5%, and -0.4% respectively. US producer prices rebounded in January by more than expected, underscoring persistent inflationary pressures that could push the Federal Reserve to pursue further interest-rate increases in the months ahead. The producer price index for final demand jumped 0.7% last month, the most since June and bolstered by higher energy costs. Given the downbeat employment and inflation data, the cautious comments from Reserve Bank of Australia Governor Philip Lowe join the increasing market bets on the hawkish Fed moves to weigh on the AUDUSD prices. That said, the market’s bets on the Fed’s next moves, as per the FEDWATCH tool of Reuters, suggest that the US central bank rates are to peak in July around 5.25% versus the December Federal Reserve prediction of 5.10%.
EUR
AUDEUR has given up ground, facing a choppy session, it touched 10-day-lows of 0.6418. However, it managed to trim some of its losses, trading at 0.6428 this morning. A decent session in equities out of Europe, with the DAX up 0.2%, and the CAC gained 0.9%. In data, we had Italian Trade Balance posting at 1.07B, and ECB’s Nagel spoke late yesterday evening. He said nothing exciting, however he reiterated that “Interest rates are not yet at a restrictive level, and it’s a mistake to ease monetary policy too quickly.” This evening we will have German PPI m/m, French Final CPI m/m, and Current Account data.
GBP
AUDGBP has bucked the downward trend and remained flat this morning, having dipped to 2-day-lows of 0.5710, before regaining momentum to trade at 0.5731 at time of writing. In equities, the FTSE gained a modest 0.2%. No data of note yesterday, however early this morning Bank of England Chief Economist Huw Pill signalled policy makers are ready to reduce the speed of their interest rate increases, saying there’s a risk of “overtightening” if the pace over the past few months is maintained.” This is a shift in rhetoric, especially considering the current state of turmoil for the UK economy. Tonight we have Retail Sales m/m, which is expected to come in at -0.3%.
NZD
AUDNZD trades slightly higher than yesterday’s open, albeit having given up the 1.10 handle, having dropped to 3-day-lows of 1.0959 before gaining steam again and coming back up to 1.0993 this morning. Not too much heavy hitting data available out of Kiwiland, so all eyes will be focused on the RBNZ Monetary Policy Statement due out next Wednesday at midday.