AUD Begins Year on Shaky Ground

AUD

The AUD kicks off the year mostly lower against major currencies, dragged by souring risk sentiment and a real wobble in the Chinese currency heading into New Year's Eve. The future outlook remains uncertain, with a still-tight Aussie labour market, Trump's upcoming inauguration and tariff threats, economic uncertainty in China and heightened global geopolitical risks all impacting the AUD. The ASX 200 index closed -1.0% as real estate weighed, rounding out the year with a 7.5% gain, beating average annual gains of 3.8% over the past decade and 5.6% over the past 20 years. The Nikkei was closed for the last day of the calendar year, while the Shenzhen and Hang Seng rounded out 2024 -1.6% and +0.1% on the day. On Tuesday, China's Manufacturing PMI printed at 50.1 (expectations were 50.3), with the miss in expectations signaling that Beijing's stimulus measures were not sufficient to meaningfully boost the country's ailing economy. Later today, we'll see the low-tier Caixin Manufacturing PMI from China, as well as Australia's Commodity Prices y/y data. Next Tuesday will bring a key CPI reading for Aussies. There will also be another inflation release at the end of January ahead of the Reserve Bank of Australia's interest rate decision in February.
 

USD

Weaker growth outlooks outside of the United States, rising geopolitical tensions in the Middle East as well as the ongoing Russia/Ukraine war added demand for the USD in 2024. Now, the prospect that the US Federal Reserve will hold interest rates higher than peers has led the USD to continue to dominate other currencies, with AUDUSD opening at fresh 26-month lows of 0.6189. Wall Street was lower in the final session of 2024, with the Nasdaq -0.9%, S&P 500 -0.4% and Dow Jones -0.1%. To economic data, little meaningful releases earlier in the week. Tonight will bring Unemployment Claims and the Final Manufacturing PMI. Tomorrow evening, we'll see the major ISM Manufacturing PMI, expected in contraction at 48.3.
 

EUR

AUDEUR starts the year at 0.5974, having fallen by over 4.5% from the 0.6261 highs seen in late November as the AUD remains under pressure. The DAX was closed on New Year's Eve while the CAC gained +0.9%. Little meaningful Eurozone data this week or next. Tonight will bring Final Manufacturing PMIs.
 

GBP

AUDGBP continues to plummet, opening at 0.4941 after hitting 4.5-year lows of 0.4933, with the Pound strengthening as Bank of England Policymakers remain divided about whether rate cuts are needed to tackle the slowing UK economy. The FTSE ended NYE +0.6%. Tonight, we'll see the Nationwide HPI and Final Manufacturing PMI.
 

NZD

AUDNZD opens a little higher at 1.1062, crawling back from 1.1007 lows seen at the start of the week. Zero Kiwi economic data this week and only a couple of minor releases set for the next week.