AUD Limps Into Easter Long Weekend

AUD

The Aussie Dollar is overwhelmingly lower, continuing the downward slide after the RBA held interest rates on hold earlier this week. Asian equities were mostly lower on Wednesday with the Hang Seng losing 0.7% and Nikkei down 1.7%. The ASX was flat at the close, ending its 7th consecutive session of positive trade, with communications and tech outperforming while energy and materials dragged on the index. RBA boss Phillip Lowe followed up the RBA’s interest rate decision when he spoke at the National Press Club, addressing questions from the media and public. It was key to note that Lowe acknowledged that getting inflation down faster would lead to more job losses, but if they held rates this month, that does not mean they will not move later. He also mentioned that it was to premature to be talking about rate cuts and that the balance of risks lean toward further rate rises. Today will see the release of the RBA’s Financial Stability Review which is only released twice a year, as well as the Trade Balance for February. Both Friday and Monday will be a bank holiday in Australia, with action kicking off on Tuesday with the Westpac Consumer Sentiment and NAB Business Confidence.

USD

AUDUSD fell down into the 0.66s again overnight, before recovering after some poor US data in the early hours this morning to trade at 0.6724.  It was a mixed session on Wall St which saw the NASDAQ close -1.1%, the S&P 500 -0.3% and the Dow Jones gained +0.2%.  U.S 2- and 10-year Treasury Bond yields fell 3bps to 3.78% and 3.30% while crude oil dropped 0.4% to $80.40 a barrel. Both ADP Non-Farm Employment Change and ISM Services PMI both missed and gave the Aussie some life. US companies added fewer jobs in March than forecast while wage growth slowed, underscoring labour demand that’s showing some signs of cooling. There were 145,000 jobs added last month which was down on expectations of 208,000, and much lower than February’s 261,000. The ISM Services PMI came in at 51.2, contracting from 55.1 in February. More Jobs data will inspire volatility from the US overnight with Unemployment Claims expected to come in at 200,000. The US will also release Non-Farm Employment Change and Unemployment Rate on late Friday evening.

EUR

The AUDEUR dropped in a similar pattern to the AUDUSD, falling before a recovering in the early hours, now sitting at 0.6159. European Equities were worse off with both the CAC and DAX closing around -0.5% lower. German Factory Orders had a resoundingly strong reading for Feb, posting a +4.8% increase when it was only expected to improve by +0.2%. Some ECB chatter last night, with the ECB’s Vujcic hit the wires saying the biggest part of the rate-hiking cycle has already happened, however, further hikes may be needed to address core inflation. ECB’s Vasle echoed the sentiment saying core inflation is clearly on an upward trend. More follow-up data from Germany with Industrial Production which could be set for a sterling performance after the aforementioned strong Factory Orders data. Large parts of Europe including Germany will have a bank holiday on Friday, with France, Italy and Germany resuming on Tuesday.

GBP

The AUDGBP following the negative trend and trading lower to 0.5389. On Wednesday, the UK’s final readings of Composite and Services PMIs for March came in mixed as the former confirmed the initial estimations of 52.2 but the key Services gauge improved to 52.9 from 52.8 initial forecasts. Looking more broadly, interest rate prospects are GBP-supportive. Markets continue to price in around 80% risk of a 25 bps hike in the BoE policy rate at the May 11th meeting but also anticipate only modest declines in the policy rate over the balance of the year. Today will see the release of the Halifax HPI, as well as Housing Equity Withdrawal for the quarter. The Britts will also have the same bank holiday on Friday and Monday.

NZD

The AUDNZD has remained heavy since the RBNZ raised interest rates yesterday, dropping significantly to 1.0636 yesterday. The RBNZ has surprisingly pushed the Official Cash Rate (OCR) by 50 basis points to 5.25%. Contrary to that, markets were anticipating a rate hike of 25 bps. The bumper rate hike likely comes as New Zealand’s inflation has turned extremely sticky. The quarterly inflation rate has remained steady at 7.2% in the last three quarters. policymakers highlighted how ‘Inflation is still too high and persistent, and employment is beyond its maximum sustainable level’. Interestingly, the impact of recent severe weather events in parts of the country was also seen as primarily inflationary, and the Bank actually pointed to the rebuilding effort supporting demand.