Aussie Services Sector More Confident Than Manufacturers
AUD
Weaker than anticipated U.S. data weighed on risk sentiment overnight causing the Aussie dollar to open higher across the board this morning. Asian Equites closed mixed last night with the ASX flat, Shanghai Comp -0.1%, and Nikkei +0.2%. Similarly, commodities were also mixed with Crude Oil -2.7%, Natural Gas -0.5%, Gold flat, Silver +0.1% and Iron Ore -2.1%. Yesterday we saw NAB Quarterly Business Confidence’s second consecutive negative reading coming in at -4, further deceasing from a previous -1 reading. Furthermore we had RBA Gov Lowe Speak, regarding the Reserve Bank review where a major change recommended by the Panel is the establishment of separate boards for monetary policy and the governance of the Bank. Out of China we saw the release of the Foreign Direct Investment ytd/y which continued its steadily declining readings, coming in at 4.9% versus the previous 6.1% reading, indicating a decline in the total spending on domestic capital investments by foreign companies. This morning we saw the local release of the Flash Manufacturing and Services PMI’s come in mixed at 48.1 and 52.6 respectively, with the Services component showing considerable improvement on the previous month's read of 48.6. The Services Sector consists of more than three quarters of Australian economic activity so it's not all doom and gloom out there, yet.
USD
A series of data misses out of the US sparked a risk-on environment pushing the AUDUSD pair to reach highs of 0.6771 before slightly dropping off this morning but still opening higher at 0.6741. US equities all closed lower with Dow Jones -0.3%, S&P 500 -0.6% and NASDAQ -0.8% with a raft of disappointing US data releases. The April Philadelphia Fed Index fell to -31.3 against an expected -19.3. Weekly jobless claims also came in worse than expected with initial claims at 245k against expectations of 240k while continuing claims were 1.865 mio against expectations of 1.825 mio. US existing home sales falling -2.4% MoM in March against expectations of -1.8% and finally the Leading Index fell by 1.2% in March compared to forecasts of -0.7%. Looking to the day ahead we have FOMC Member Harker Speaking and tonight we have Flash Manufacturing and Services PMIs, both expected to drop.
EUR
Piggybacking off the back of favorable risk sentiment, the AUDEUR pair shot up to 2-week highs of 0.6164 before slightly dropping off, but still opening higher at 0.6147. Euro equities were down on close, with DAX and CAC loosing 0.6% and 0.1% respectively. Yesterday German PPI m/m saw a considerable miss, forecasted at 0.6% and coming in at -2.6%. EU Consumer Confidence for April printed at -17.5, beating expectations of -18.5. Last night we also saw the ECB minutes released showing a very large majority in favor of raising rates by 50bp, despite this the Euro failed to capitalize not make any meaningful gains. A big night ahead with the anticipated release of the French, German and collective Eurozone’s Flash Manufacturing and Services PMIs, mixed results expected.
GBP
AUDGBP opens up at 0.5419 while the FTSE ended the session flat in the face of scarce economic data. Focus remains on higher-than-expected March UK inflation (released earlier this week) which has seen pricing of the Bank of England interest rake hike cycle push to new highs. Markets are now expecting the current 4.25% to reach 5% by the end of 2023, with a 25bps bump largely expected at the May meeting. Tonight’s PMIs & Retail Sales data could shed some light on how the economy is coping with higher rates, with the latter expected to fall -0.5% m/m as households adjust to cost of living pressures.
NZD
AUDNZD opens up to 7-week highs at 1.0915 after weak CPI numbers have shown inflation slowed more than economists expected in Q1 2023, furthering beliefs than price pressures have peaked and the central bank may soon cease its aggressive interest rate hike cycle. A quiet couple of days approaching for the NZD with no data being released until next Wednesday in the form of Trade Balance and Credit Card Spending y/y.