AUD Falls Off its Perch
AUD
Rocky open to the week as Australian dollar took a beating closing into the weekend against most majors. Asian equities were mixed on the close with the Nikkei +0.4% and Hang Seng -1.4%. The ASX finished Friday’s session +0.6%, with a 2.5% gain in healthcare stocks helping the benchmark to a +0.9% weekly close. Commodities took a hit with Gold -2.5%, Silver -4.7% and iron ore -1.9%. In today's economic data we have Q4 Retail Sales volumes which markets expect to be flat at -3.9%. Big data tomorrow as well as RBA announces its first interest rate decision for the year, markets expecting a 25bps hike to 3.35%. Guidance as to the extent of future hikes will be key to currency movements, keeping in mind last week's stubbornly high local inflation number. Friday, we have yearly CPI and PMI data expected from China as well.
USD
AUDUSD experienced a sharp 100+ pip loss opening at 0.6912 this morning as a result of some bumper US economic data on Friday night. The NASDAQ closed -1.6%, the S&P500 -1% and the Dow Jones -0.4%. US economic data on Friday showed that the labor market remains tight, and is keeping the Federal Reserve under pressure to bring down inflation to the 2% target. US non-farm payrolls smashed expectations after the economy created 517K jobs in the month, exceeding estimated of just 185k. Consequently, the Unemployment Rate fell to 3.4% from 3.5% which was directly opposed to expectations of an increase to 3.6%. Hourly earnings came flat on forecast at 0.3% MoM with YoY results at 4.4% against expectations of 4.3%. Adding to the USD strength in the wake of the bumper employment report, the ISM Services PMI data was also considerably above expectations, printing at a solidly expansionary 55.2 compared to expectations of a neutral result at 50.0. Looking to the week ahead we have several FED member talks as well consumer sentiment data being released on Friday.
EUR
AUDEUR tips to the downside losing 1.45% in a matter of 24 total hours since Friday's report to open at 0.6410 this morning. European equities opened largely in the red with the Eurostoxx 50 -0.6%. France’s Final Composite PMI printed at 49.1, coming in higher than the preliminary reading of 49. Also coming printing higher than the preliminary reading of 49.7, Germany’s Final PMI Composite was 49.9. In the UK, January Composite PMI printed 48.5, up from an initial reading of 47.8. In the Eurozone, December Producer Prices rose 24.6% coming in higher than expectations of +22.4%. ECB’s Vasle said rates will rise 50bps in March which is consistent with recent commentary from ECB President Lagarde last week. ECB’s Simkus echoed the sentiment saying inflation is only now becoming restrictive, with core inflation still to peak. ECB’s Kazimir said the number of hikes beyond March is yet to be decided, but doesn’t think March will be the last. Continuing the ECB commentary, Muller said core inflation is a cause for concern, adding that an economic slowdown may not ease inflation. In summary, plenty of hawkish commentary from the ECB which is at the moment providing an unusually united front on plans for monetary policy. There is no significant data of note looking ahead into the week.
GBP
AUDGBP opened lower this morning at 0.5723 retreating from Friday's 4 month high of 0.5803. The FTSE closed down -0.2% on Friday. BOE’s Bailey hit the wires saying it is too soon to say if last week's 50bps rate hike is the last rate rise of the cycle. We then heard from Pill who said UK inflation remains much too high, but we have to recognise we have done a lot with monetary policy already. He continued saying it's important the BOE doesn’t do too much on monetary policy. A busy week ahead for the UK with monetary policy report hearings said on Thursday and well monthly GDP data expected at -0.3% worse than its previous +0.1% data.
NZD
AUDNZD opening flat at 1.0928 after both currencies suffered similar downward shifts after the events of Friday evening. Unfortunately there is no significant data being stated from NZD this week and today is a bnk holiday (Waitangi Day), so tomorrow's RBA rate decision will likely dictate direction for this pair this week.