AUD Falters as US Flags Potential China Tariffs
AUD
The Aussie dollar opens largely down against majors while the ASX finished Friday’s session down -0.43% after Iron Ore had its worst day in 6 months. Asian equities were also in the red, ending the week mostly down on news that the Biden administration is considering further tariffs and limiting US investments in China. This week China’s top decision-making body, the Politburo, will meet to discuss economic policy. Recent data shows strong infrastructure growth and record high new credit in Q1 2023, with a major stimulus package unlikely to be rolled out, at least not before the release of GDP figures in mid-July. The main focal point for Aussies this week will be monthly & quarterly CPI data on Wednesday. The rate of inflation is expected to ease further, with the RBA pausing rates last month to gather further information. For this reason, any surprise lift in the figures could lead to more tightening & brief AUD strength.
USD
AUDUSD opens down at 0.6696 after US PMIs landed in expansionary territory on Friday evening, indicating stronger demand conditions have supported sharper growth, particularly in the Services sector. Firms saw new orders jump at the highest rate in 11 months, encouraging businesses to pass on costs at the highest rates in 7 months & representing further demand-driven inflationary risks. The next major piece of data will arrive on Wednesday, with Advance GDP q/q expected to increase +2.0% & influence sentiment toward next week’s Fed monetary policy decision. Friday’s Core PCE m/m (expected at +0.3%) could prove pivotal, with further price stickiness likely cementing another rate hike in May.
EUR
AUDEUR opens near 8-month lows at 0.6089 after French and German PMI data showed each economy’s services sectors grew at the fastest pace in 12 months, strengthening market expectations of another ECB interest rate hike next week. A relatively quiet week in terms of Eurozone data, with the main piece arriving on Friday in the form of German Preliminary CPI m/m. Markets expect an increase of +0.6% which could put another 50bps hike on the table for next Thursday’s interest rate decision. ECB chatter could also move the dial, with key central banker speeches scattered throughout this week.
GBP
AUDGBP opens down at 0.5378 while the FTSE closed up +0.1% with UK PMIs signaling further growth within the services sector. Service sector growth underpinned the fastest rise in private sector output in over one year (similar to the US and Eurozone data) with increased new order intakes suggesting an improved economic landscape. A quiet week for the pound will see Public Sector Net Borrowing data released tomorrow, while CBI Industrial Order Expectations are expected to further the contractionary trend and arrive at -22.
NZD
AUDNZD remains near 2-month highs, opening slightly down at 1.0896 despite a lack of data out of the Kiwiland. Wednesday morning will bring NZ Trade Balance data, with the figure expected at -500 million as the gap between import and export prices narrows.