Risk Aversion Weighs on AUD
AUD
The Aussie Dollar has taken a hit overnight, weighed down by souring global risk sentiment which saw most global equity indices contract. Lackluster commodity performance didn’t help either, with SGX Iron Ore -0.6%, Copper -1.1% and precious metals flat. Asian equities finished mixed with the Nikkei -0.2%, Hang Seng -0.5% and the ASX +0.8%. Yesterday, the Westpac Consumer Sentiment Index dipped -2% to 92.8. The consumer mood has improved materially over the course of 2024 but remains pessimistic overall (below 100) as the year ends with renewed concerns about the economic outlook. Later today, we’ll see the MI Leading Index m/m. The next key events will be China’s Loan Prime Rates decisions on Friday, ahead of the RBA’s recent Meeting Minutes, on Christmas Eve.
USD
AUDUSD has fallen to fresh 13-month lows, opening at 0.6337 after souring risk sentiment continues to weigh on the Aussie Dollar. The USD also strengthened a little after Retail Sales figures grew +0.7% in November, topping expectations of +0.6% and reflecting further resilience in the American consumer heading into the holiday season. A softer session on Wall St. saw the Dow Jones trading -0.8% (ninth day in a row of losses), the S&P 500 -0.6% and the NASDAQ -0.4%. Tomorrow morning, the Federal Reserve is expected to lower interest rates once more, taking the Federal Funds Rate 0.25% lower to 4.5%, marking a full percentage point of reductions since September. Rate cuts are expected to slow next year by more than official projected three months ago, with a majority of economist predicting just three reductions in 2025 amid less progress on cooling inflation down towards the central bank’s 2% target.
EUR
AUDEUR fell throughout the course of yesterday’s session, touching 6-week lows of 0.6031 before kicking off the day at 0.6039. The DAX fell -0.3% and the CAC gained +0.1%. Overnight, there was a rebound in German ZEW Economic Sentiment, with upcoming German snap elections and ECB monetary policy being the grounds for optimism. There’s no major Eurozone data for the remainder of the week, with Euro volatility largely subject to tomorrow morning’s US Federal Reserve interest rate decision, FOMC Statement and Press Conference.
GBP
AUDGBP fell 0.85% from yesterday’s open, opening at 0.4980, flirting with 4.5-year lows as was seen earlier in the week. This was largely due to Pound strength overnight, with strong UK jobs data adding to the Bank of England’s growing headache, also seeing the FTSE fall 0.8%. British pay rose by more than expected in the three months to October, with Average Hourly Earnings 3m/y at 5.2% (prev. 4.4%), while there was only a +0.3k change in the number of people claiming unemployment benefits (expectations were +28.2k). Then Bank of England has previously stated that wage growth above 3% is inconsistent with their 2% inflation target, so last night’s job report adds to the case for an interest rate hold from the central bank on Thursday evening. Before then, we’ll see a fresh batch of UK inflation data, this evening, with an expected increase to 2.6%.
NZD
AUDNZD starts the day flat at 1.1010, seemingly unphased by this morning’s low-tier data from New Zealand. The GDT Price Index fell -2.8% over the past two weeks and Westpac Consumer Sentiment printed at 97.5, up from the previous 90.8. While any score below 100 indicates a pessimistic view, the data shows sentiment is improving with increased confidence in the economy. Tomorrow morning, NZ quarterly GDP is expected to contract by -0.2%, in line with the previous contraction. This would take the Kiwis into another technical recession.