AUD Mixed Ahead of RBA's 1st 2024 Meeting
AUD
The Aussie Dollar opens this morning mixed against the majors after some lower-than-expected Caixin Services PMI results, paired with surprisingly strong data from the US services sector. Equities followed suite with the ASX -1.0% with Mining and Energy producers underperforming, Shanghai Comp -1.0%, and the Nikkei +0.5%. Commodities didn’t fare any better closing in the red with Gold -0.8%, Silver -1.6%, Iron Ore -1.1%, and Copper -1.3%. Big day for the Aussie as all eyes will be focused on the RBA’S policy decision set to be released at 2:30pm with the wide view that the cash rate will remain unchanged, however RBA forecast revisions (in the Statement on Monetary Policy), the post-meeting Statement, and Press Conference (3:30pm) could provide useful insights on whether market expectations for rate cuts (currently priced to start in June) are possible. It is expected that the RBA will pivot its communication to more clearly outline whether the tightening cycle has finished, although it is unlikely that the RBA board will discuss rate cuts due to wanting further evidence of disinflation, the current estimate is that rate cuts will commence in August.
USD
The AUDUSD coupling continues its downward trend, losing its 0.65 handle to open this morning at near-7-week lows of 0.6482. The USD surged to an 11-week high as Fed rate cut bets diminished after a rare 60 Minutes interview with Federal Reserve Chair Jerome Powell stating the Federal reserve is on track to cut interest rates only three times this year, a move that’s expected to begin as early as May. The US services sector continues to surprise to the upside, printing at 53.4 (near-1-year highs) after spending 43 of the past 44 months in growth territory... Further combatting the recent interest rate cut narrative. Looking at US equities, Wall Street closed in the red with the Dow Jones -0.6%, S&P -0.1%, and the Nasdaq -0.3%. Overnight, FOMC Member Mester will speak at an economics conference in Ohio.
EUR
The AUDEUR opens flat at 0.6036 despite yesterday’s myriad of Eurozone Services PMIs printing largely better than forecasted. Eurozone equities followed the trend, closing largely flat, with the DAX -0.1%, and CAC 0.0%. No major news releases today out of the Eurozone with only German Factory Orders m/m and Retail Sales m/m set to be released.
GBP
The AUDGBP coupling opens slightly higher this morning at 0.5169, even after the Final Services PMI came through at 54.8, better than expectations of 53.8. The FTSE also closed flat. Earlier in the morning we had the BOE’s Pill stating that UK economic activity has been quite weak, and services price inflation has begun to stabilise. Looking at the rest of the day we will also see the release of BRC Retail Sales Monitor y/y and the Construction PMI.
NZD
The AUDNZD opens lower this morning at 1.0707 after yesterday's Commodity Price Index gained 2.2% m/m in January. Higher returns for dairy products were again the major driver. In New Zealand Dollar terms, the index lifted 2.9% m/m as the NZD fell 0.2% against the trade weighted index. No major news today from our Kiwi neighbors as they have a Bank Holiday, however, all eyes will be focused on tomorrow's Employment Change q/q and Unemployment Rate (expected to increase from 3.9% to 4.3%).