Aussie Dollar Finishes the Week Strong
AUD
The Aussie dollar has gained ground against majors overnight after largely positive results from AUD-linked commodities yesterday. SGX Iron Ore gained +1.2%, CMX Copper was up 2.0% while Silver and Gold were mixed at +0.3% and -0.6% respectively. Asian equities finished the day in the red as Japan tumbled -1.5% with Hong Kong also giving up -1.4%. The ASX proved more resilient, losing only -0.1% after a choppy day. Australia’s Retail Sales rose by +0.2% in August, slightly below expectations of +0.3%, signaling the RBA’s rapid interest rate increases are weighing on the economy. The slowdown in household spending pairs with downbeat consumer sentiment, bolstering the case for another RBA pause at 4.1% on Tuesday. Even so, recent RBA Meeting Minutes indicate the central bank has kept to door well and truly open to further tightening. No meaningful data today, while tomorrow’s Chinese Manufacturing and Non-Manufacturing PMIs are expected in expansionary territory.
USD
AUDUSD has reclaimed the past week’s losses overnight, gradually climbing since yesterday afternoon to open at 0.6427. Wall St. rebounded overnight with the NASDAQ up +0.8%, S&P 500 up +0.6% and the Dow closing 0.3% higher. Unemployment Claims printed at 204K for the week, short of expectations yet 2k higher than the previous reading. Final GDP q/q arrived at +2.1% (expectations +2.2%) as personal consumption, the main driver of the US economy, rose an annualized +0.8% in the past quarter. Compared with the previous +1.7%, this marks the weakest advance in over a year as the Fed’s hiking cycle continues to take effect. Regardless, consumer spending is showing sings of resilience in the current quarter, leading the US Federal Reserve and Wall Street to grow more optimistic on near-term growth. If so, this could further the greenback’s 7% rally since its low point in June. Tonight, we’ll see the Core PCE Price Index m/m (the Fed’s preferred measure of inflation) expected at +0.2%, although the recent surge in oil prices poses a risk to near-term inflationary pressures. If the figure arrives off-expectations, we could see further movement for the AUDUSD pair.
EUR
AUDEUR opens at 2-month highs of 0.6080, while the DAX and CAC gained +0.7% and +0.6% respectively. No surprise results from Eurozone data last night, with German Prelim CPI m/m printing on-expectations at 0.3% and Spanish Flash CPI y/y on-expectations at 3.5%. Tonight will bring CPI Flash Estimates for the Eurozone, with the headline figure expected at 4.5% y/y, down from last month’s 5.2% y/y. Higher energy prices pose a problem for the European Central Bank and could determine whether they keep rates on hold at 4.5% for the foreseeable future or hike further. Unlike the US Federal Reserve, the ECB has to factor in a much weaker economy into its decision making, so the bar for a further hike is higher.
GBP
AUDGBP opens near 2-month highs after gaining ground overnight to again test the 0.5260 resistance level. The past 2 days have been quiet in terms of UK data although this afternoon we’ll see their Current Account and Final GDP q/q. No major data until next Thursday’s Construction PMI.
NZD
AUDNZD has reclaimed most of the ground lost this week, having hit lows of 1.0722 yesterday evening before rallying to open at 1.0778. Yesterday we saw ANZ Business Confidence print at +1.5, being the most optimistic figure from the Kiwis since May 2021. Notably, inflation expectations fell to 5.0% y/y, although ANZ indicated pricing intentions are going the ‘wrong way’, rising and showing inflation impulses have not yet been beaten. Monday will bring NZ Building Consent data.