AUD Weaker Leading Into Tomorrow's RBA Decision

AUD

The Aussie had a considerable tumble against the majors on Friday which continued into the week's close, with weaker-than-expected data releases on Friday morning. To the data, and PPI q/q came in at 0.5% which was under the forecasted 0.9% and down from the previous 1%. Retail Sales m/m kept the AUD on the backfoot, coming in at -0.8% under the expected 0.0% and down from 0.8% previously. When adding these results to the lower-than-expected CPI data on Wednesday, no wonder the AUD had a tough second half of the week. Looking at the commodities, metals had gains over the weekend, with Gold up 0.8%, Silver up 0.5% and Iron Ore up 0.1% with the stand-out performer being the volatile Copper which is up 1.3%. Asian equities did not fair well, ASX down 0.7% over the weekend and the Nikkei down 0.4%. Today we have crucial PMI data out of China, expected to show a slight downtick, with Manufacturing PMI expected at 48.9 from a 49 and Non-Manufacturing PMI expected at 52.9 from 53.2. China will be hoping for any signs that the economy is finally starting to regain some momentum after overly restrictive Covid-zero policies obliterated economic growth. Tomorrow we have the most important monthly piece of data from Australia, the RBA’s Cash Rate, which futures markets are expecting to remain steady at 4.1% (a measly 2.8 pips of a hike is currently priced in).

USD

The AUDUSD opens lower this morning, with the pair loosing 87pips during Friday’s trading hours, then finding some support in the weekend into today’s open of 0.6654. Wall Street remained higher heading into the week’s close with the NASDAQ up 1.9%, S&P 500 up 1% and Dow Jones up 0.5%. Looking to the data, there was a lot from the US released on Friday night, with the results being mixed. Core PCE Price Index m/m which is the Fed Reserve's preferred measure of consumer inflation came in at expectations of 0.2%, only slightly down from the previous month's 0.3%. Adding to the improvement in spiralling costs, the Employment Cost index came in at 1% which was under the expected 1.1% and showed a reduction in costs from the previous 1.2%. The Fed will be pleased with these results which give weight to their comments last week that they no longer foresee a recession in the US later this year. Looking forward, tonight will be a quiet for data releases form the US, with just the Chicago PMI being released, expected to read 43.3 from a previous 41.5.

EUR

The AUDEUR had a smooth fall over the weekend, opening 77 pips lower this morning at a rate of 0.6034. European markets ticked higher in late trade, closing the day with modest gains with the CAC up 0.2% and DAX closing up 0.4%. Looking to the data, German CPI m/m was released on Friday, coming in at expected of 0.3%, same as last month, causing no effect on the market. Spanish Flash CPI y/y was also released on Friday, reading 2.3%, above the expected 1.7% and higher than the previous 1.9%. Tonight, we have CPI for the whole Eurozone being released, with CPI Flash Estimate y/y expected at 5.3% from 5.5% and Core CPI Flash Estimate Y/Y expected at 5.4% from 5.5%. Whilst modest improvements in inflation are expected, it will still take some time for last week's ECB 25bps rate hike to take effect.

GBP

The AUDGBP follows trend with a hard fall over the weekend, reaching 18 day lows this morning, opening at 0.5179. The UK equities had a quiet close to the weekend, with the FTSE closing flat at 0.0%. There was no data out of the UK on Friday and over the weekend. Tonight, there is Mortgage Approvals being released tonight, expected to go from 49k to 51k. All eyes will be on the UK later this week when the Official Bank Rate will be released on Thursday, expected to increase from 5% to 5.25%.   

NZD

The AUDNZD saw a moderate fall over the weekend, seeing a choppy decline to this morning’s open of 1.0811. It was a quiet finish to the week data wise, with nothing released on Friday and over the weekend. Today is a quiet day with only the ANZ Business Confidence being released at 11am, no expectations but a previous reading of -18. The big release for the week will be Wednesday’s release of the Unemployment Rate, expected to increase form 3.4% to 3.5%.