NFP Report in Focus as Fed Prioritises Employment

AUD

The Aussie Dollar opens either a tad higher or flat against majors after China’s Purchasing Managers’ Indices printed almost exactly on-expectations yesterday. China’s factory activity expanded for the first time since April, with the official PMI coming in at 50.1, while non-manufacturing activity rose to 50.2, up from 50.0 in September. Overall, China’s economic growth has slowed, dragged by tepid consumer demand and a real estate slump, although exports have been a rare bright spot as of late. In Australia, Retail Sales figures showed a 0.1% month-on-month increase in October (expectations were +0.3%), pointing to the recent tax cuts having minimal impact on consumer spending. Asian equities ended the day lower, the Nikkei -0.5%, Hang Seng -0.3%, and Shenzhen flat. The ASX retreated -0.3% as consumer staples and utilities dragged. Commodities had a rough day, with Iron Ore leading the charge, down -0.9%. Looking ahead, today we have Producer Price Index q/q figures from Aus, as well as the Caixin Manufacturing PMI for China. The next key event will be the RBA Cash Rate decision, statement and press conference on Tuesday.
 

USD

AUDUSD reached highs of 0.6944 on October 1, before spending the past 4 weeks gradually declining over 5% as markets buy-up the USD to de-risk ahead of the US Presidential election next week. Over the past 2 days, the pair have put a brief hold on the decline, moving mostly sideways since Wednesday and opening today at 0.6580. Risk sentiment weakened again yesterday, which saw the Nasdaq close -2.6%, S&P 500 -1.8% and Dow Jones -0.7%. Overnight, the Core PCE Price Index (the Federal Reserve’s preferred inflation gauge), printed on-expectations at +0.3% m/m, being the largest monthly gain since April, bolstering the case for a slower pace of interest rate cuts following last month’s outsized reduction. Tonight will bring the biggest data event this week, the US Non-Farm Payrolls report. Expectations are +106k jobs added in October, +0.3% m/m earnings as well as the Unemployment Rate steady at 4.1%. The Fed has shifts its gaze from inflation to the labour market, which has defied expectations by improving in the latter half of this year, with last month’s NFP report coming in at 245k, the highest reading in 6 months. Being the hot topic at the moment, and surprise results, like last month’s, would likely bring about significant currency volatility again.
 

EUR

Over the past week, AUDEUR has fallen 2.5% as poor global risk sentiment batters the Aussie Dollar ahead of the US election next week. The pair kick off November at 0.6051. The DAX ended yesterday -0.9%, while the CAC gave up -1.0%. Yesterday’s Core CPI Flash Estimate y/y shows Euro area annual inflation is expected to have been 2.0% in October, up from 1.7% in September, driven by the services sector, food, alcohol and tobacco prices. No Euro data out today. Next week will be a very quiet week, with no heavy-hitting data set for release. On Monday evening, we’ll see the Final Manufacturing PMI for the Eurozone.
 

GBP

AUDGBP has risen more than a percent over the past couple of days, with the pair opening this morning at 0.5097. This comes after the Pound weakened against most majors on Wednesday following the unveiling of the UK’s much-awaited Autumn Budget. It softened further yesterday ahead of market-bets on the US Core PCE outcome. Minimal UK data yesterday. Tonight, we will see the Nationwide House Price Index as well as the UK’s Final Manufacturing PMI.
 

NZD

AUDNZD traded sideways throughout the course of yesterday’s session, opening today at 1.1006. Yesterday morning bought the first Kiwi data release for the week, with ANZ Business Confidence printing at a fresh 1-year high of 65.7, being the fourth consecutive monthly increase as businesses anticipate further interest rate cuts from the Reserve Bank of New Zealand. ANZ Chief Economist Sharon Zollner noted “Business optimism continues to rise, with forward-looking activity indicators higher again, and a decent lift in reported past activity and employment”. The next major NZ release will be the RBNZ’s Financial Stability Report on Tuesday. We will also see their labour market figures on Wednesday.

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