AUD Softens Ahead of Employment Report
AUD
The Aussie Dollar opens lower against all the majors bar the GBP despite relatively hawkish RBA commentary yesterday. Asian equities were mixed, with SHANGHAI COMP 0.1%, NIKKEI -1.8% and the ASX -0.4%. Commodities were also mixed with Copper 0.7%, Gold 0%, and Silver -0.2%. No news out of China yesterday or today, however tomorrow China has is GDP, Retail Sales, and Unemployment Rate figures all coming out. On home soil, the RBA’s Sarah Hunter spoke yesterday and commented that Australia’s inflation outlook is “well anchored” however they are remaining vigilant to risks on both sides. Today, we have employment data coming out with the main data event being our Unemployment Rate which is expected to remain unchanged at 4.2%, as well as the Employment Change expected at 25.2k for the previous month. Over the past 12 months, the average monthly reading has been 31.9k, although the most recent 5 readings have been above this figure. For this reason, a 25.2k print later this morning could reflect a softening in the labour market, which the RBA would like to see if they are to lower rates any time soon.
USD
The AUDUSD pair opens lower yet again at 0.6665 as investors rule out a large rate cut from the Fed at the next policy meeting and priced in a potential election victory for Donald Trump. Wall Street ended the day in the green with the DOW JONES 0.8%, S&P 0.5%, AND NASDAQ 0.2%. Yesterday, there was mainly low tier data out of the US with the Import and Export price figures coming out either on expectation or slightly lower respectively. Today we have US Retail Sales expected at 0.3% and Initial Jobless Claims expected to remain unchanged at 258k. Focus is now shifting as a 25-basis point cut is all but priced in for the Fed at their next policy meeting. Investors are also shifting focus to US elections which are on November 5 and they are now pricing in the potential of a Trump victory which generally strengthens the USD.
EUR
AUDEUR opens lower at 0.6136 as all eyes are on tonight’s European Central Bank interest rate decision. European equities both closed the day down, CAC -0.4% and DAX -0.3%. Big day for the Euro as ECB President Lagarde spoke this morning ahead of tonight’s ECB rate decision where the central bank is expected to cut by 25 basis points to 3.4%. This is on the back of a cooling EU economy which can be expected to continue to decline in the near-term. It's likely that the ECB will continue to limit the extent of forward guidance, preferring to maintain its approach of ‘data dependence’.
GBP
AUDGBP opens flat at 0.5122 after spiking to 0.5155 yesterday on the back of softer-than-expected Uk inflation figures. The headline figure printed at +1.7%, falling short of +1.9% expectations and below the Bank of England's 2% target. Inflation is cooling faster than expected which has now increased the chances of a rate cut at the BOE's next policy meeting after the majority of members at the last meeting were in favour of leaving rates unchanged. The FTSE closed the day up 1%. No data events today, however, tomorrow the UK have their Retail Sales figures coming out which are expected to come in -0.3% for the month.
NZD
AUDNZD opens lower at 1.1000. No news out of NZ for the rest of the week, however, there may be a little bit of volatility in the pairing today should Australia’s employment figures come in off-expectations later this morning, which could impact market expectations of future RBA monetary policy decisions.