AUD Extends Losses as USD Remains Solid
AUD
The AUD starts the week lower across the board after our major trading partner, China, had their New Loans come in much lower than forecasted. The figure printed at 580B CNY, with expectations being almost double this. This credit expansion halt is signaling that despite recent stimuluses they are facing challenges with economic growth and battling deflation. The AUD has also held losses as Trump's tariff threats have created a headwind for risk-sensitive currencies, with further losses as Beijing begins retaliation against Trump trade sanctions, launching a probe into US-based Nvidia. Asian equities finished the week in the red with the Nikkei -0.9%, Hang Seng -2.1%, and the ASX 200 -0.4%, with the local index marking its worst week since August. Commodities were mixed with Iron Ore +0.6%, Copper -1.2%, Gold -1.4% and Silver -1.6%. Locally, we have our Manufacturing and Services PMIs out today and expected at 49.4 and 50.5. We also have more Chinese data as they have their Industrial Production y/y expected at 5.4% and Retail Sales expected at 5%.
USD
AUDUSD opens slightly down at 0.6357 as the AUD continues to experience the impact of the Trump trade. The USD also strengthens a little as markets expect the Fed will shift to a more-hawkish stance after the widely anticipated 25bps interest rate cut to 4.5% this Thursday morning. Over the weekend, there was not much significant data apart from US Import Prices m/m which came in at +0.1% in line with previous figures. A choppy session on Wall Street ultimately ended with all three equity indices closing almost unchanged on the day with Dow Jones the biggest mover at -0.2%. Looking forward, tonight we have the US Flash Manufacturing PMI expected at 49.4 and Flash Services PMI expected 55.7. The Empire State Manufacturing Index is expected to drop from 31.2 to 6.4. It's clear the US manufacturing sector is hurting and brings more attention to the Fed rate decision and commentary this Thursday, where markets are confident of a 25bps cut as the central bank tries to bring more strength to the industrial sector and greater economy.
EUR
AUDEUR opens at 0.6058, down about 25 basis points as the AUD weakens across the board. Over the weekend we had Industrial Production m/m print flat, in line with expectations, as well as French Inflation figures which came out at -0.1%, also on expectations. European equities ended in the red with the DAX -0.1%, and the CAC -0.2%. Today, we have Flash Manufacturing and Services PMIs for the Eurozone, ss well as European Central Bank President Lagarde being set to speak at an Economic Conference in Lithuania.
GBP
AUDGBP opens flat at 0.5025 despite UK GDP m/m printing at -0.1%, which missed forecasts of 0.1%. This was the second month in a row where UK GDP has contracted, which was due to a fall in production output. This result in conjunction with recent PMI readings, we are seeing an economy that is essentially flatlining, although not shrinking. Equities saw the FTSE close +0.1%. Last Friday’s poor GDP results will bring more attention to tonight's Manufacturing PMI which is expected at 48.4 and Services PMI expected at 50.9.
NZD
AUDNZD opens slightly lower at 1.1023 after touching 1.1057 highs on Friday evening. This morning, we had the BusinessNZ Services Index which printed at 49.5, up from previous readings of 46.2. We also had their Food Price Index come in at -0.1%. The next significant piece of data is their Quarterly GDP on Thursday morning which is expected to be in the red and hence will officially enter the NZ Economy into a ‘Triple Dip Recession’.