AUD Active in Overnight Sessions

AUD

The Aussie Dollar found itself slipping against the majors since Friday open, with only the Kiwi dollar the exception, ahead of a solid upcoming week of data to fuel currency markets. Asian equities closed last week lower with the Hang Seng leading the losses, falling -1.2%. The Nikkei also fell -0.7%, whilst the ASX fell -0.9% with tech stocks driving the fall. RBA boss Phil Lowe spoke on Friday and said the Board estimates that additional rate increases will be needed over months ahead, and “If we don’t get on top of inflation and bring it down in a timely way, the end result will be even higher interest rates and more unemployment in the future”. Given the backdrop of high inflation and a weaker Australian labour market data revealed on Wednesday, the commentary weighed on the AUD. It’s a slow start to the week on the macro-calendar with no data today. Tomorrow will feature the RBA Meeting Minutes, alongside Manufacturing, Services, and Composite PMIs. Later in the week will have the Composite Leading Index, and the Wage Price Index.

USD

The AUDUSD travelled as low as 0.6811, late on Friday night before recovering some losses to trade at 0.6874 currently. Wall St closed lower on Friday with the NASDAQ -0.6% while the S&P 500 fared a little better and closed -0.3%.  U.S yields edged lower as did crude oil which finished the day -2.7% at $76.30 a barrel.  A series of lesser-tiered data on Friday offered strength to the Big Dollar. US Import Prices declined by -0.2% in January to come in lower than forecasts of -0.1% while Export Prices rose by +0.8% against forecasts of -0.2%. The US Leading Index for January printed at -0.3% as expected, up from -0.8, though there was no reaction to the data. More chatter out of the Fed last week with Fed’s Bowman on the wires, saying that the January jobs report did not indicate that the US economy was slowing and that rate hikes had not yet been effective in taming inflation and further hikes would be needed. Fed’s Barkin also called for a 25bp hike at the next FOMC meeting to allow for flexibility and that he did not support rapid increases. The week starts off with the US celebrating Presidents Day today, though the week kicks off with PMI’s on Wednesday morning, and FOMC Meeting Minutes on Thursday.

EUR

The AUDEUR also dipped before rebounding, finding a low of 0.6406, now trading at 0.6420 this morning. European Equities fell, but only marginally at Fridays close, the DAX and CAC losing -0.3% a piece. ECB talks took centerfold out of Europe, Schnabel said the “broad disinflation process hasn’t started yet”, with the 50bp March hike needed under virtually all scenarios. She added that weaker transmission may require more forceful action, with risk markets currently underestimating inflation. ECB’s Villeroy also hit the wires saying Euro-zone inflation may halve by mid-2023, adding that government should cut aid as energy costs subside. PMI data will kick things off tomorrow evening, before the German ifo Business Climate index on Wednesday PM.

GBP

The AUDGBP teetering on the edge of the significant 0.57 handle, moving between either side of the level this morning, currently trading at 0.5697. UK Retail Sales were significantly better than expected for January with the reading posting at 0.5%, better than the forecasted decrease of -0.3%. The Pound was stronger off the back of the data with it being the strongest reading in 2 months. Service and Manufacturing PMIs will be the headline piece for the UK this week, both due out on Tuesday evening.

NZD

The AUDNZD bucked the trend and managed to start the week off in the green despite all signs that the Kiwis will raise rates at midday on Wednesday, the pair trading at 1.1017. There was no data to excite markets at close of Friday. Markets are expecting a 50pt move on Wednesday though there are reports the move could be as large as 75pts. A 50pt move will take the OCR to 4.75%, slightly below the RBNZ's own projected terminal rate of 5.50%. The RBNZ has already raised rates by a total of 400 basis points since October 2021. It will likely get to at least 500, with a peak of 5.25% or higher expected by mid-year. All eyes on the Kiwis come Wednesday.