Trump's Tariff Threats Weigh On AUD
AUD
The AUD took a tumble against the majors yesterday, fueled by Trump threatening an additional 10% increase on current Chinese tariffs, impacting risk sentiment which saw most global equity indices fall. Commodities were mixed to finish the day, with Oil closing down 0.5%, Natural gas down 1%, Copper down 0.9%, Gold up 0.2%, Silver and Iron Ore both up 0.1%. Asian equities fell yesterday, with the ASX dropping 0.7% and the SHANGHAI COMP falling 0.1%. There was no news released yesterday, with all eyes on today’s CPI y/y for October, expected to increase to 2.5% from 2.1%, notably this will be the first increase since June. Even so, this data doesn't typically draw much attention from the RBA as the first monthly reading of each quarter is largely for a selection of goods prices (rather than services). The RBA will be placing more weight on January's quarterly print. Markets are now fully pricing in an RBA interest rate cut in July 2025, with odds for May now sitting near 90%.
USD
The AUDUSD takes a tumble yesterday, weakening from President elect Trumps threat of increased tariffs, dropping to a near 4-month low of 0.6433 before opening this morning at 0.6473. Wall Street was soft into the close, with the DOW JONES closing up 0.1% and the S&P 500 and NASDAQ were both up 0.4%. Last night saw a slew of news, with the S&P/CS Composite-20 HPI y/y dropping 0.6% to 4.6%, Richmond Manufacturing Index remained at -14, despite forecasts of -10, and CB Consumer Confidence increased to 111.7, up 2 points as expected. The big miss for the night was the New Home Sales, which dropped 128k to 610k, expected to only fall by 13k. FOMC Meeting Minutes were announced this morning, showing that the Federal Reserve is looking to make a gradual approach to the cutting cycle, mentioning that they are happy with where employment is sitting, with some economists stating that the “Trump Trade” may cause some inflationary pressures within the US. Tonight will bring the main event for the USD this week, the Core PCE Price Index. The Fed's preferred inflation gauge is expected to have risen 0.3% in October, and by 2.8% from a year earlier, in what would be the largest advance since April. Fed Chair Powell has indicated that the central bank expects a bumpy path back to the inflation target and that it will take more than a couple of monthly prints to persuade it otherwise.
EUR
The AUDEUR follows the global trend, falling off overnight, briefly flirting with the 0.6150 barrier last night, opening this morning at 0.6172. European equities took a hit overnight, with the DAX closing down 0.6% and the CAC down 0.9%. Yesterday was quiet on the news front, with German Buba President Nagel Speaking at a conference around growth of the German economy, not impacting markets. Tonight will see German GfK Consumer Climate set to be released, expected to drop from -18.3 to -18.8.
GBP
The AUDGBP slides lower the in past 24 hours, with the pair dropping over 0.5% yesterday, opening this morning at 0.5139. British equities closed in the red yesterday, with the FTSE finishing down 0.4%. Yesterday saw the BRC Shop Price Index y/y released, coming in 0.2% higher at 0.6%, and CBI Realised Sales dropping to -18, expected at -14 from -6. MPC Member Pill Spoke last night, mentioning that budgetary pressure on CPI may be overstated, not impacting markets. Looking forward there is no news set to be released until Friday.
NZD
The AUDNZD sees a small decline yesterday, dropping the 1.11 handle overnight, opening this morning at 1.1096. There was no news released yesterday, with all eyes on the Reserve Bank of New Zealand's Official Cash Rate set to be released at 12pm today. Forecasts are that there will be a 50bps cut, moving the rate to 4.25%, with the following Monetary Policy Statement and Press Conference to being the catalysts that will move markets, with the RBNZ taking a very dovish tone recently.