Stagnant Chinese Economy Undermining Beleaguered AUD

AUD

AUD opens mixed against the majors today after continuing weak Chinese economic data and comments from RBA Gov Lowe that inflation was indeed easing despite an increase in the monthly inflation numbers. Asian equities saw a bleak close after disappointing China PMI data earlier in the day, the already low Hang Seng was down another -2.2% with the NIKKEI, -1.4%, and Shenzhen, -1%, in tow. The ASX ended the day down -1.6%.Yesterday started with RBA Gov Low speaking, saying that "the central bank cannot afford to allow inflation to continue over target beyond mid-2025”, however also mentioned that interest rate hikes were working and the potential for further rate hikes was still data dependent and no single variable was responsible for such decisions. Late in the morning the monthly CPI y/y was released (the RBA prefers to use the quarterly adjusted CPI numbers rather than this monthly release), forecasted to increase to 6.4% from 6.3%, but came well above at 6.8%. At the same time Chinese Manufacturing PMI and Non-manufacturing PMI’s were released, both below expectations which dragged AUD lower. The struggling Chinese economy and low risk sentiment globally is providing strong headwinds to any AUD upside, despite the sticky inflation report and the potential for further rate hikes to come. Today we have Private Capital Expenditure and Retails Sales figure late morning.

USD

The AUDUSD fell steadily yesterday however rallied in the early hours of this morning to open this morning just lower on yesterday at 0.6509. Looking to the equities, Wall St. remained softer into the close with the Nasdaq and the S&P 500 both -0.6%, while the Dow Jones was -0.4%. To yesterday’s data, Chicago PMI for may fell sharply to 40.4, down from 48.6 and well below expectations of 47.2. The USD was briefly offered before the release of much better than expected JOLTS Job Openings data, which showed 10.4 million jobs available, much higher than the forecasts of 9.4 million. USD strength was reversed however early this morning with Fed commentary coming from Jefferson and Harker indicated they both supported a pause at the June FOMC meeting while the Fed’s Beige Book suggested that inflation was cooling across many Fed districts. Looking forward, tonight there is the ADP non-farm employment change and Unemployment Claims, followed by ISM Manufacturing PMI which is expected to show continued contraction.

EUR

The AUDEUR opens higher today, sitting in a tight range for most of yesterday before an overnight push up to open at 0.6082. European equity markets added to losses in late trade, with the CAC and DAX both down -1.5%. Looking to the news, German CPI for May declined 0.1% MoM and rose 6.1% YoY, weaker than respective expectations of +0.2% and +6.5%. Lots of headlines from the ECB’s Financial Stability Review. A fragile outlook on stability; correcting housing markets; and the possibility for increased banking capital requirements didn’t give much inspiration for the EUR to move off its lows. This evening the Manufacturing PMIs will be released for the EZ's major economies, all of which are expected to remain contractionary as is typical the world over, however later on the CPI Flash estimate y/y is expected to show a much-needed decrease in European consumer inflation. Rounding out a busy night, ECB President Lagarde speaks, giving some insight and direction on how the ECB will be interpreting these releases in data.

GBP

The AUDGBP tracked steadily lower in the last 24hrs, opening lower at 0.5225 this morning. The FTSE also saw a slide, closing down 1% in what was a quiet session for economic data  The UK data picks up tonight, with Final Manufacturing PMI expected to have no change at 46.9 and Nationwide HPI m/m is also being released, tipped at -0.5%, with the previous reading being 0.5%. 

NZD

The AUDNZD opens slightly higher at 1.0802, with an early rally in yesterday’s morning following local CPI data, followed by a tight range for the rest of the day and overnight. Looking to the Kiwi data, yesterday ANZ Business Confidence was released at 11am, coming in at -31.1, higher than last months -43.8 but still definitely in the pessimistic range. looking forward there is no data being released today. There is no meaningful data due from across the ditch for the rest of the week, the next potential for decent swings will be Tuesday's RBA interest rate decision.