PMIs Show Services Sector Expansion
AUD
AUD starts the day flat against all major currencies bar the USD, against which we open a little higher. The past 24h saw the release of global Purchasing Managers' Indices (PMIs - a survey of purchasing managers rating the relative level of business conditions), with the general theme being expansion in services sectors and contraction in manufacturing sectors. The Aussie Flash Manufacturing and Services PMIs both fell short of previous readings, landing at 48.2 and 50.4 respectively, with little reaction from the markets. Asian equities finished off yesterday mixed with the ASX -0.6%, Shanghai Comp -0.2% and Nikki flat. Commodities also finished mixed with Crude Oil -0.9%, Natural Gas -2.5%, Gold and Silver +0.1%, Iron Ore flat, and Copper -0.2%. We also saw Chinese November Retail Sales miss estimates, forecasted at 5% year-on-year, but coming in at 3%., while Industrial Production came in line with forecasts at +5.4% y/y. Softer consumer spending will obviously put more pressure on Beijing to implement further stimulus. A quiet day ahead with little on the calendar of note. At 10:30am, we'll see Westpac Consumer Sentiment data.
USD
The AUDUSD ticks marginally higher overnight, opening this morning at 0.6370 after the US Empire State Manufacturing Index for December fell from 31.2 to 0.2, worse than expectations of a decline to 10.0. Wall Street saw a mostly positive performance with the Nasdaq +1.3%, S&P 500 +0.5% and Dow Jones flat. Later in the session, the US Manufacturing PMI for December fell to 48.3 against expectations of 49.5, whilst Services PMI rose to 58.5 a lot higher than market expectations of 55.8, signaling further acceleration of economic growth in December, with output rising at the steepest rate in 33 months. Firms' expectations of output in the coming year also lifted higher, hitting a two-and-a-half year high, reflecting growing optimism about business conditions under the incoming Trump administration. Looking to the night ahead, U.S. Retail Sales for November will be published. The data will offer insights into consumer spending for the month and help shape expectations for 4Q real GDP growth. Consensus estimates predict a m/m increase of 0.5%, up from the previous 0.4%.
EUR
Little movement for the AUDEUR pair over yesterday’s session, starting the day flat at 0.6062. European equities ended yesterday’s session lower with the DAX and CAC losing 0.5% and 0.7% respectively. A batch of PMIs out of the Eurozone saw mixed results, sticking to the general global theme of expansion in the services sectors and contraction in the manufacturing sectors. European Centra Bank President Lagarde also hit the airwaves stating that more interest rate cuts are to come, and that the direction of travel was clear. Looking to the night ahead, Germany will be releasing their ifo Business Climate and ZEW Economic Sentiment, with mixed results expected.
GBP
The AUDGBP drops off slightly during the overnight session before opening relatively flat at 0.5019. The Pound strengthened slightly off the back of the December PMIs which saw the UK services sector coming in at 51.4 (50.0 forecasted) and manufacturing sector at 47.3 (48.5 forecasted). Pointing to another marginal uptick in UK private sector output, rising business activity across the service economy helped offset an accelerated downturn in manufacturing production. British equities finished the session lower with the FTSE losing half a percent on close. Looking to the night ahead, we expect to see the release of UK labour data with the Average Earnings Index 3m/y, Claimant Count Change and Unemployment Rate. Real wage growth is expected near 5% y/y in the UK. With annual inflation at 2.1%, wage growth above 3% lends itself to the Bank of England holding their key interest rate at 4.75% later this week.
NZD
The AUDNZD saw a lackluster session yesterday, opening slightly flat at 1.1019. No new data out yesterday and only low-tier data tomorrow morning. Nothing of note until Thursdays’ GDP q/q, expected at -0.2%, which would take NZ into another technical recession.