AUD Starts the Week on the Backfoot
AUD
The Aussie dollar lost out after a red-hot inflation reading out of the US on Friday night, the AUD taking losses across the board and refreshing recent lows against some pairs. Asian equities were mixed on Friday’s close with the Nikkei +1.3% and Hang Seng -1.3%. The ASX finished Friday’s session up +0.3%, ending the week -0.5% lower. Commodities took a walloping and didn’t help the Aussie, Iron Ore lost -2.2%, Copper down -2.3%, whilst Gold also lost over half a per-cent. With no data locally on Friday, Asian markets looked to China for the CB Leading Index m/m, which posted a reading of -0.6%, failing to move markets. It’s a slow start to the week for currency markets, but we kick things off with Company Operating Profits q/q at 11:30am this morning, which are expected to increase by +1.8% after a mammoth loss of -12.4% in Q3. Australian Inflation and GDP data are the headlining data releases for the week, come Wednesday morning.
USD
The AUD/USD continues to plummet further down from it’s early February highs, dropping to a low of 0.6719 and currently trading at 0.6726 this morning. U.S. equities finished the week poorly with the NASDAQ closing -1.7%, the S&P 500 -1.1% and the Dow Jones -1.0%. The slump in equities came after the US released Core PCE (Personal Consumption Expenditures) Price Index. The Fed's favoured measure of inflation accelerated in January with markets now fully pricing 25bp moves in March, May and June. It rose 0.6% month-on-month versus expectations of a 0.4% print and is also above the 0.4% increase reported by the core CPI report. This will surely ensure the Fed Reserve mantra of ongoing hikes continues, and talks of a potential 50bp move at the March FOMC meeting can’t be completely discounted. Other data out of the US saw January New Home Sales rise 72% to 670k, beating forecasts of a +0.7% increase to 620k. University of Michigan Sentiment Survey for February was revised up to 67.0 from 66.4, keeping the USD firm. The US has no data releases set for Monday, but will see Core Durable Goods Orders and Pending Home Sales early tomorrow morning, with CB Consumer Confidence and ISM Manufacturing PMIs following later in the week.
EUR
The AUD/EUR took a blow and traded as low as 0.6352 with the Aussie suffering on all fronts, the current rate is 0.6382. European markets drifted lower into the close with losses on the CAC and DAX were around -1.7%. ECB speaker Nagel offered some hawkish remarks said underlying price pressures continued to be too high, adding that stopping tightening too soon would be ‘cardinal sin’. He continued urging the market not to exclude more significant rate hikes beyond March. Inflation Flash Estimates will headline the macro calendar for the Eurozone this week, with CPI expected to decrease from 8.6% to 8.2% y/y.
GBP
Even with a quiet close to the week for the Britts, the AUD/GBP lost ground and trades 0.5612 this morning. Reports out of the UK suggest that Rishi Sunak is on the verge of announcing a new Brexit deal, with the deal targeting to conclude negotiations between the UK and EU which aims to improve trade conditions for Northern Ireland. There’s a raft of BoE speakers talking this week alongside some second-tier data which is less likely to excite, MPC member Broadbent will be the first to speak this evening.
NZD
The AUD/NZD also retreating from its recent highs, down to 1.0913 this morning. New Zealand Q4 Retail sales were the first cab off the rank this morning but failed to live up to expectations, actually shrinking by -0.6% when expectations were for it to increase by +0.2%. Little immediate reaction in the aftermath to the data. RBNZ Gov Orr is due to speak on Friday with small pieces such as ANZ Business Confidence dripping through from the Kiwis between now and then.