Greenback Strengthens as Retail Sales Surprise
AUD
Weaker-than-expected Chinese economic data and increased geopolitical tensions have further weakened the Aussie Dollar. Asian equities also finished the session down with the ASX at -0.3%, Shanghai Comp at -2.1% and Nikkei down -0.4%. Yesterday, we had multiple releases from China, most notably being GDP q/y which came in short of expectations at 5.2%, Retail Sales y/y printed at 7.4% (exp. 7.9%) and their Unemployment Rate which came in higher at 5.1%. Macro data from 2023 shows China’s economy may be transitioning to a new growth model, with investment in the property sector falling, the economy is more dependent on the manufacturing and service sectors. Today, we have the Aussie Employment Change expected to print at 15.4k, the Unemployment Rate expected to print at 3.9%. If the employment report points to further weakness in December, markets will likely up their bets of expected interest rate cuts by the RBA in 2024. Regardless, the RBA currently remains the least dovish among major central banks.
USD
The AUDUSD opened weaker at 0.6549 after US Retail Sales rose at the strongest pace in three months. The headline figure gained +0.6% m/m and the Core metric climbed +0.4%m/m, although markets still expect further economic slowdown ahead as slowing employment and wage growth feed through and the lagged impact of higher interest rates takes some additional toll. Equities also finished in the red with the Dow Jones at -0.4%, S&P 500 at -0.8% and Nasdaq at -0.9%. Yesterday we had FOMC Member Waller speak on the economic outlook and monetary policy in Washington, where he made some dovish comments on inflation “As long as inflation doesn’t rebound and stay elevated, I believe the FOMC will be able to lower the target range for the federal funds rate this year”. Tonight, we'll see US Unemployment Claims, Building Permits and the Philly Fed Manufacturing Index.
EUR
The AUDEUR opens in the red at 0.6020, with the equities also down with the DAX at -0.8% and the CAC at -1.1%. Yesterday we had The French Gov budget balance print in short at -198.0B from a previous of -177.7B, the Final Core CPI y/y print at 3.4% and the Final CPI y/y print at 2.9%. Today we had ECB President Lagarde Speak at the World Economic Forum, following we had German Buba President Nagel speak where he stated “Rate cuts will come sooner or later”. Later today we will see the ECB Monetary Policy Meeting Accounts and the Current Account print which is forecasted to print at 30.9B. Tomorrow we’ll see Lagarde Speak again and the German PPI m/m.
GBP
The AUDGBP opened in the red this morning at 0.5165 with FTSE -1.5% in yesterday's session. We had a relatively busy day for the Pound yesterday with their CPI y/y printing higher than expectations at 4% from 3.8%, their Core CPI y/y print at 5.1%, the PPI Input m/m print at -1.2% and the HPI y/y print at -2.1%. We also had Gov Bailey Speak at the Economic Fairs committee in London, no hawkish comments were made. Tomorrow, we’ll see the Retail Sales m/m print expected to come in at -0.5% lower than the previous at 1.3%.
NZD
The AUDNZD opens slightly weaker at 1.0720, whilst the same downwards trend was experienced across the board. Yesterday we had the GDT Price Index print at 2.3% up from the previous at 1.2%, and today we had the FPI m/m come in at -0.1% from the previous at -0.2%. Following this, tomorrow we’ll see the BusinessNZ Manufacturing Index and the Visitor Arrivals m/m.