US Manufacturing and European Industrial Production Faltering
AUD
Weak US data paired with improving risk sentiment allowed the Aussie dollar opens higher across the board this morning. Asian Equities also closed in the green last night with ASX +0.1%, Shanghai Comp +1.2% and Nikkei +0.8%. However, Commodities saw a mixed session with Crude Oil +1.8%, Natural Gas -1.9%, Gold and Silver both lost 0.2%, Iron Ore- 0.6% and Copper +0.4%. Yesterday was a quiet day for both Australia and China with no data being released. A bit out locally today, as we await the release of Westpac’s Consumer Sentiment which previously reported at 9.4%. More importantly we will see the release of the RBA Board Minutes this morning, which may provide further clarity on the Board’s debate about raising the cash rate by +25bps and holding the cash rate steady. Governor Lowe mentioned in his speech following the May Board meeting that there was a “strong consensus” to lift the cash rate due to “the strength of the labour market, the persistence of global inflation, and the persistence of services inflation”. We are also expected to see a series of mid/lower tier data out of China today in the form of Fixed Asset Investment ytd/y, Industrial Production y/y, Retail Sales y/y and Unemployment Rate, which are all expected to grow with the exception of the Unemployment Rate which is expected to remain flat at 5.3%.
USD
The AUDUSD pair saw a rally of almost 70pips over yesterday’s session, fuelled mainly by the disappointing Empire State Manufacturing Index numbers, the pair opening this morning higher at 0.6704. Wall Street closed in the green with Dow Jones +0.1%, S&P 500 +0.3% and NASDAQ +0.7%. Empire State Manufacturing for May fell to -31.8, down from +10.8 and well below expectations of -3.7 seeing its largest miss since August 2022, indicating a greater than expected deterioration of economic health as businesses may be reacting less quickly to changing market conditions. The Fed’s Bostic also hit the wires saying cutting rates this year is not his baseline, with cutting still not expected well into 2024. Looking ahead, tonight we will see the release of Core Retail Sales & Retail Sales m/m which are both expected to improve 1.3% and 1.8% respectively.
EUR
A positive reversal in risk sentiment and weak European industrial production allows the AUDEUR pair to retrace Friday's losses, opening higher this morning at 0.6163. European equities saw no movement, both DAX & CAC closing flat. Euro-area Industrial Production fell 4.1% m/m in March and -1.4% y/y, coming in much lower than expected and falling the most in three years with the result driven by sharp falls in Germany. German Wholesale Price Index fell to -0.4% after markets forecasted +0.3%. EU Economic Forecasts indicated that lower energy prices, narrowing supply constraints and a strong labor market supported moderate growth in the first quarter of 2023, dispelling the looming fears of a recession. Tonight we will see some mid/low tier data being released in the form of German ZEW Economic Sentiment, Eurozone Flash Employment Change q/q, Flash GDP q/q, and Trade Balance.
GBP
The AUDGBP saw a brief spike to 0.5363 yesterday after noon before dropping off but still opening higher this morning at 0.5351. British equites closed in the green with the FTSE +0.3%. A quiet day yesterday with only the release of the CB Leading Index m/m which came in slightly under previous reading of -0.6% at 0.9%. Today we will see the release of some important employment data with the Claimant Count Change expected to increase from 28.2K to 31.2K. The unemployment rate is expected to remain flat at 3.8% and Average Earnings Index 3m/y is expected to drop 0.1% to 5.8%.
NZD
The AUDNZD pair remains fairly flat, opening this morning at $1.0732. Yesterday we saw BusinessNZ Services Index drop from 53.8 to 49.8 which indicates purchasing manager’s confidence in relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories are falling.