US Rates to Remain Higher for Longer
AUD
The Aussie Dollar opens mixed against majors this morning after the People's Bank of China kept the 1y and 5y Loan Prime Rates on hold yesterday at 3.45% and 4.2% respectively. This comes after recent data suggests much-needed economic growth from China (e.g. Retail Sales and Industrial Production). Asian equities closed in the red as the Nikkei fell 0.7% and Hang Seng 0.6%. The ASX finished 0.5% lower as Energy and Mining stocks tumbled 1.8% and 1.2% respectively. Commodities were mixed with SGX Iron Ore gaining +1.1%, while Gold and Silver gave up -0.1% and -0.2% respectively. Little data today ahead of tomorrow's Aussie Flash Manufacturing and Services PMIs.
USD
AUDUSD opens slightly lower than yesterday at 0.6447 after volatility overnight saw 0.6511 highs at 2:50am before lows of 0.6439 this morning. This comes after the US Federal Reserve decided to hold interest rates at 5.50%, with the 'hawkish pause' commentary indicating the door remains open to another hike, depending on incoming data. Longer term, the Fed is signaling less prospects of rate cuts and a diminishing chance of a recession as it guides inflation back to 2%. The general consensus among economists is that rates may remain higher for longer than previously anticipated. Given the challenges the economy faces, the market is understandably skeptical. Tonight, we'll see US Unemployment Claims expected at 224k for the past week, with the previous figure being 220k. Markets will focus on this given the labour market remains tight in the US.
EUR
AUDEUR gained ground overnight, hitting a peak of 0.6069 before retracing to open relatively flat at 0.6046. Little market-moving data from the Eurozone yesterday, while tonight we'll hear from the European Central Bank's President Lagarde who is due to speak at the Mediterranean meetings in Marseille. Markets remain focused on tomorrow afternoon's Flash Manufacturing and Services PMIs.
GBP
AUDGDP opened higher this morning at 0.5223 compared to 0.5209 yesterday. UK CPI landed below expectations of 7.0% y/y, printing at 6.7% y/y, while the Core figure (which excludes food, energy, alcohol and tobacco prices), landed at 6.2%, down from 6.9% last month. The FTSE gained +0.1% in the aftermath. An eventful night ahead with the Bank of England's interest rate decision at 9pm. Although market pricing of a further hike has pulled back after yesterday's lower-than-expected inflation print, at 25bps increase to 5.5% is still expected from the central bank.
NZD
AUDNZD opens flat at 1.0867 with no significant data coming out overnight. This morning, New Zealand's GDP q/q printed at +0.9%, beating forecasts of +0.4%. Little market reaction to the data. With some soft news coming out on Friday it seems to be a quiet end to the week for the NZD.