AUD Higher After Exports Drive Growth
AUD
The Aussie dollar has ticked up a little higher over the past 24h after yesterday’s quarterly GDP figures arrived on-expectations at +0.4%. This indicates the Aussie economy maintained its momentum in the three months through June, with the expansion attributed to exports and sectors less impacted by the Reserve Bank of Australia’s 12 interest rate hikes. The data is expected to bolster the RBA’s confidence that it can engineer a soft landing, although Australia’s growth is expected to weaken moving forward as households are squeezed by higher prices and interest rates. Asian equities were mixed in yesterday’s session with the ASX down -0.8%, CSI 300 down -0.2% and Nikkei up +0.6%. Today, we’ll see the domestic Trade Balance and 11:30am while RBA Governor Lowe is delivering some closing remarks this afternoon ahead of his departure later this month.
USD
AUDUSD gained little ground yesterday, opening at 0.6382, while US equities traded lower with the NASDAQ -1.1%, S&P 500 -0.7% and Dow Jones -0.6%. Treasury yields edged higher as markets priced in higher odds of another Federal Reserve interest rate hike this year after last night’s ISM Services PMI landed at 54.5, being stronger than the anticipated 52.5. This represents the strongest pace of expansion for services since February, bolstered by an uptick in the ‘prices paid’ sub-index. The general belief among economists is that the Fed will pause this month and potentially hike by 25bps in November, which could easily send the Aussie dollar lower against the almighty greenback. This evening, we’ll see US Unemployment Claims with 232k individuals expected to have filed for unemployment insurance for the first time during the past week.
EUR
AUDEUR opens slightly up at 0.5952 after trading sideways since yesterday’s mid-afternoon. European equities were weak with the DAX -0.2% and CAC -0.8%. We are increasingly hearing the term ‘stagflation’ to describe the Eurozone economy, which is doing no favors for the growth-sensitive euro (stagflation was a key concern weighing on the currency at its birth in 1999). The European Central Bank is finally acknowledging that growth will be subdued relative to initial forecasts given persistent, ‘sticky’ inflation (the core metric remains above 5% y/y). Regardless, markets are pricing just a 25% chance of a hike at the ECB meeting next Thursday, with economist expecting risk to the upside. We’ll see a range of low-tier data in the next 24h, including the French Trade Balance, Italian Retail Sales and German Final CPI y/y. The only major release ahead of next Thursday’s interest rate decision will be the German ZEW Economic Sentiment survey on Tuesday evening.
GBP
AUDGBP opens 0.8% higher this morning, having regained the 0.51 handle late in the evening to open today at 0.5106. This comes after the Bank of England’s Governor Bailey hit the wires saying inflation continued to decline in the UK and that any tick up in the near future would be unlikely to change the central bank’s outlook. No major data releases ahead of next Tuesday afternoon’s Claimant Count report. No doubt the BoE will give weight to this as tight labour market conditions remain a key concern in the inflation battle, as stated by BoE’s Dinghra yesterday.
NZD
AUDNZD gained steady ground over the course of yesterday, peaking at 1.0873 in today’s early hours before settling at 1.0868. Little in the way of data moving forward, with next week bringing NZ’s monthly Food Price Index and BusinessNZ Manufacturing Index. The next market-moving piece of Kiwi data will be their quarterly GDP figure on September 21st. No expectations posted at this point in time.