UK Facing 5 Quarters of Recession
AUD
The Aussie Dollar trades down across the board this morning, with no data of note, both demand for the US Dollar and the poor performance of equities following a number of Fed speakers weighs on the local currency. Asian equities finished largely in the red with the CSI 300 the worst performer down 0.4%, however the ASX outperformed its peers closing Wednesday’s session +0.35% buoyed by Financial and Materials stocks. A mixed session in commodities, with Gold flat, Silver -0.2%, Iron Ore -0.3%, and Copper was hit the hardest with -0.8% losses. No data will be released today, with all eyes focused on what’s to come tomorrow – the RBA Monetary Policy Statement. This will give investors a view of the Reserve Bank’s outlook on future hikes, as well as the current state of inflation in the economy.
USD
AUDUSD trades slightly lower this morning, maintaining ranges within the 0.69 handle of 0.6915 – 0.6996, trading at the low end of those ranges this morning of 0.6925 at time of writing. Wall St traded lower overnight driven largely by hawkish commentary from Fed officials. The NASDAQ was -1.7%, the S&P 500 -1.1% and the Down Jones -.6% late in the North American session. US yields edged fractionally lower while crude oil gained 1.8% to $78.50 a barrel. Last night, President Biden gave his State of the Union Speech. Biden focused primarily on China’s weaknesses as a way of putting into sharper relief the US’s successes under his administration, compared the so-called “autocracies”. Coming in the form of a taunting of China, though, this would hardly qualify as an outreach to President Xi Jinping or an attempt at détente between the US and China. He also mentioned “Two years ago, our economy was reeling. As I stand here tonight, we have created a record 12 million new jobs, more jobs created in two years than any president has ever created in four years. Two years ago, COVID had shut down our businesses, closed our schools, and robbed us of so much. Today, COVID no longer controls our lives.” This view is complemented by Fed Member Williams’ address last night. He said “We need to take a long-term view of data, and not get caught up in the day-to-day. We’re seeing more positive signs globally about growth, and signs suggest we still have some work to do to get the economy back into balance.” These both support the case for further rate hikes to come out of the US. Looking ahead, Unemployment Claims will be released this evening – this will indicate supportive or opposing views to the growth of the labour market.
EUR
AUDEUR trades slightly lower this morning, showing a steady advance throughout the day and reaching 0.6502 before a reversal yesterday evening sent the pair retreating from the newly-formed handle, trading at 0.6461 at time of writing. Eurozone equities were mixed, with the DAX up 0.6%, and the CAC losing out -0.2%. In data, last night we saw Italian Retail Sales m/m figures, with expectations at -0.8%, even though still contractionary, it beat expectations significantly coming in at -0.2%. Today we have German Prelim CPI m/m, with a previous result of -0.8% and optimistic forecasts of an increase of 0.9%. We also have EU Economic Forecasts coming out this evening, which gives an outlook over the next 2 years. Looking ahead, tomorrow we have Italian Industrial Production m/m.
GBP
AUDGBP trades lower this morning, having reached a peak of 0.5787 in early evening trade, before beginning its decline down to trading at 0.5732 at time of writing. In equities, a somewhat positive session out of the UK with the FTSE posting gains of 0.3%. This evening, the Monetary Policy Report Hearings will be released, where several MPC members will testify on inflation and the economic outlook. The UK economy appears to be in the worst shape of the G7 and the IMF thinks that could persist for two years. The central bank itself warns of a five-quarter recession beginning now. In fairness, the economy contracted in Q3 22 (-0.3%). The first estimate of Q4 GDP is due Friday and the median forecast in Bloomberg's survey is for a flat quarter. In political news, Prime Minister Sunak’s allies talk about how he has had to clean up from his immediate predecessors Johnson and Truss, while his critics see strikes, scandals, and several government policy reversals to come this year.
NZD
AUDNZD trades lower this morning, having crept up to the 1.10 handle for the first time in almost 3 months and touched 1.1030 before bulls shifted their optimism and began back-pedaling towards the 1.09’s, trading at 1.0978 at time of writing. No data yesterday or today for both the Antipodeans, however data will resume tomorrow with the BusinessNZ Manufacturing Index – previously showing a contractionary result.