Strong Commodity Prices Support AUD
AUD
The AUD is generally higher to start the week after a productive session leading into the weekend, with broader USD weakness and supportive commodity prices giving the AUD room to breathe after what was otherwise a tough week. No domestic data out affecting the Aussie on Friday or over the weekend, however, the ASX lost -1.7% in what would become a tough 24hours for equities globally. Gold gained +0.7%, Silver +1.6%, Iron +0.5%, and Copper +1.3%. Today at 11:30am Chinese inflation data is released, with CPI y/y currently penciled in at a +0.2% gain and PPI y/y at a -5%. Producer prices have been dropping in China for most of this year, with inflation staying steady in a manageable range. We also have Westpac Consumer Sentiment and NAB business confidence for Australia out tomorrow.
USD
The AUDUSD pair gained a handsome 1% over the course of the weekend, currently sitting at 0.6689. Worse than expected JOLTS job openings and a lower than expected Non-Farm Employment change helped push a broad US weakness across markets – as other currencies also made similar gains against the USD. The Unemployment Rate came in at the expectation of 3.6%, a very slight drop from the previous figure of 3.7%. US Non-Farm Payrolls for June showed 209k jobs were created, down from 306k and below expectations of 230k with 2 month net revisions at -110k. No data from the US today, but plenty to move markets this week with CPI printing on Wednesday night (previous y/y at 4% and expectation at 3.1%) and Core PPI m/m on Thursday night.
EUR
The AUD is up very slightly on Friday’s levels against the Euro, seeing modest gains from this time on Friday morning – sitting at 0.6096 on this week's open. A relatively large 30bps drop occurred midnight Friday before this pair recovered higher. Looking to the small pieces of economic data from Europe on Friday, German Industrial Production fell -0.2% from a 0% expectation, French Trade balance showed a gain in exports, posting a -8.4B figure versus the -10.6B expectation, Italian Retails Sales m/m were much higher than expected printing at +0.7% versus the -0.2% expectation. Today the Sentix Investor Confidence Index prints expecting to show a slightly more pessimistic figure of -18, versus the -17 previous.
GBP
The Aussie Pound pair is flat from Friday, sitting at 0.5197 and trading in a tight range, reaching a low of 0.5172 and a high of 0.5215 over the weekend. The Halifax House Price Index m/m posted a -0.1% change on Friday night, against the 0.1% expectation. The Bank of England’s Mann spoke at the Annual Meeting of the Central Bank Research Association in New York – stating, it’s better to front load rate policy moves. Bank of England Governor Bailey also spoke on Sunday, acknowledging the problems facing the global economy were more severe in the UK. He also rejected the notion that moving the inflation target higher than 2%. Some experts have suggested moving inflation targets for central banks to 3% in the short-term future to take pressure off central banks. However, Bailey rejected this, warning that changing the goal could damage the bank’s credibility and “unpick expectations.” Continuing and saying “absolutely critical that that flexibility isn’t confused with people thinking we are not pursing 2% anymore.”
NZD
Small gains on the antipodean pair here with AUDNZD moving up about 25bps higher over the weekend, currently sitting at 1.0780. This is after a week of falling a full 1% before recovering slightly over the weekend. No data from New Zealand on Friday. This week on Wednesday the RBNZ is due to decide on interest rate again, with markets currently predicting a pause at 5.5%.