0.5% Interest Rate Hikes for Europe and the UK
AUD
Last night's central bank monetary policy announcements from Great Britain and Europe resulted in a choppy night with the Aussie dollar opening mixed against the majors this morning. Not much reaction from the Asian equity markets with ASX gaining 0.1%, Nikkei up 0.2% and Shanghai Comp flat. However commodities were mostly lower on close with Crude Oil -0.8%, Natural Gas -5.3%, Gold flat, Silver -0.2% and Iron Ore -1%. A quieter period for local data, although having little to no effect on the currency markets saw the release of Building Approvals m/m which vastly beat expectations of 1.1%, coming in at 18.5%. We also saw NAB Quarterly Business Confidence read at -1 compared to a previous reading of 9 as concerns about global and domestic economic growth mounted. Still, business conditions remained strong, calming from the highs seen in Q3. Nothing on the cards today for Australian data, but we will see the release of China’s Caixin Services PMI expected at 51.1.
USD
The AUDUSD pair drops off slightly form the 8 month highs we saw yesterday, opening lower this morning at 0.7077 off the back of US Unemployment Claims. US weekly jobless claims were better than expected with initial claims falling to 183k to beat forecasts of 186k while continuing claims fell to 1.655 to beat forecasts of 1.684. US Factory Orders for December rose 1.8% to fall short of expectations of a 2.3%, while the core measure declined by 1.2% against expectations of +0.2%. Durable Goods Orders for December were confirmed at 5.6% as expected. Risk sentiment remained elevated overnight with US Equities with NASDAQ +2.7%, S&P 500 +0.9% and Dow Jones falling slightly to close at -0.3%. Tonight have some more noteworthy data releases with Average Hourly Earnings m/m expected flat, Non-Farm Employment Change expected to drop to 193K, Unemployment Rate expected to raise slightly to 3.6% as well as the Final Services PMI and ISM Services PMI.
EUR
The rate chopped around last night after the release of the ECB's rate hike decision and press conference, the AUDEUR saw highs of 0.6521 before dropping off and opening fairly flat this morning at 0.6485.The ECB raised rates by 50bp to 3.00% as expected and noted that rates would still have to rise significantly at a steady pace. The statement also explicitly said that a 50bp hike would come in the March meeting. ECB President Lagarde began by repeating the statement and noted the resilient European economy and inflationary pressures remaining strong with recent declines largely the result of energy price declines. She also said that risks to the growth and inflation outlooks were balanced. Responding to this, risk sentiment improved as European equities closed higher with DAX gaining 2.2% and CAC gaining 1.3%. Nothing coming out for the Eurozone over the weekend as the dust settles from last night’s release.
GBP
The Aussie Dollar slowly edged upward against the Pound hitting 4-month highs of 0.5806 off the back of some softer commentary that followed the Official Bank Rate release before slightly dropping off, but still opening higher this morning at 0.5788. As expected the BOE raised rates by 50bps to 4%, with MPC votes 7-2. In the accompanying commentary the BOE said the persistence of inflation requires further tightening, with inflation risk skewed significantly to the upside. However, BOE Governor Bailey speaking at his post-meeting press conference despite saying inflation risks were to the upside, was otherwise a little dovish as he suggested there were signs inflation was turning the corner and that the end of the hiking cycle was approaching. A quieter weekend for the Pound with no data to be released until Thursday week.
NZD
The AUSNZD pair opens significantly lower, loosing close to 70 basis points in the early hours of the morning, hitting lows of 1.0904 before regaining some traction opening at 1.0927. Yesterday morning we saw a drop in the Building Consents m/m falling to -7.2% from a previous reading 6.7%. Nothing on the cards today, and a quiet period ahead as New Zealand banks will be closed in observance of Waitangi Day on Monday.