Chinese Activity to Spur Aussie Dollar?

AUD

The Aussie Dollar opens slightly lower ahead of what will be a major week for currency markets, bringing 5 central bank meetings (Australia, USA, England, Japan, Switzerland), Aussie employment data, Chinese Industrial Production and global Flash PMIs… Currency volatility is expected over the coming days. The ASX was led -0.6% lower on Friday as the materials sector dropped, while Asian equities were mixed to end the week as the Hang Seng fell back -1.4%, Nikkei -0.3% and Shenzhen up +0.3%. Around lunch time today we’ll see China’s Industrial Production y/y (exp. 5.3%, prev. 6.8%) and Retail Sales y/y (exp. 5.6%, prev. 7.4%). The property sector is expected to remain a major drag on the Chinese economy, raising doubts about the nation’s ability to gain momentum and achieve the ambitious growth target of about 5% in 2024. Today’s data is expected to show year-on-year growth in Industrial Production and Retail Sales, albeit at a slower pace than the previous readings. The RBA will also meet tomorrow to announce the latest Cash Rate decision, having held it at 4.35% since November 2023. Policymakers considered hiking at the last 2 meetings, although decided against it. Given further signs of slowing domestic inflation, the decision may be less contentious this week.
 

USD

Quiet conditions for AUDUSD over the weekend saw the pair trade between 0.6574 and 0.6554, having lost a little bit of ground since Friday morning to open today at 0.6561. Wall St. traded lower to end last week with the Nasdaq closing -1.0%, the S&P 500 -0.6% and the Dow Jones -0.5%. The Empire State Manufacturing Index landed well-short of expectations, printing at -20.9 (exp. -7.0, prev. -2.4). Labour market conditions remained weak as both employment and hours worked decreased, with a decline in new orders pointing to softening demand. The Preliminary University of Michigan Consumer Sentiment Survey fell a tad, landing at 76.5 (exp. 77.1, prev. 76.9) with consumer views stabilising into a holding pattern given few perceived signals the economy is currently improving or deteriorating. Looking forward, zero notable data in the front half of the week, while markets look to Thursday morning’s Federal Reserve interest rate decision, FOMC Statement and Press Conference. The Fed has so far avoided the trap of pre-committing to a rate cut, although last week Fed Chair Powell told lawmakers they are ‘not far’ from being confident that inflation is moving sustainably towards 2%. Powell’s readiness to cut is likely the reason markets have been reacting more to soft data prints than upbeat ones.
 

EUR

AUDEUR reached 0.6040 highs in Friday’s early evening, having then fallen sharply to 0.6023 despite no major economic data releases. The pair open at 0.6026 this morning with the DAX and CAC ending Friday's session flat. Tonight, we’ll see Final CPI figures for the Eurozone, as well as the Trade Balance. European Central Bank President Lagarde will speak on Wednesday evening ahead of Flash PMI data on Thursday. Lagarde may contribute to other ECB Officials’ dovish commentary as of late, which have hardly given markets a reason to hang onto the Euro. The AUDEUR currently seems to enjoy sitting above the 0.60 handle.

GBP

AUDGBP reached 0.5180 highs in Friday’s late morning, having traded largely sideways throughout the session before briefly touching 0.5140 lows in the evening. The pair opens at 0.5145 this morning, while the FTSE ended -0.2% on Friday. UK Consumer Inflation Expectations landed at 3.0% on Friday, the lowest level since the Bank of England embarked on an aggressive interest rate hiking cycle to contain prices. The previous figure (November 2023) was 3.3%, while the longer-term view remains stubborn at 2.8% for the inflation outlook in 2025. Later this morning we’ll see the Rightmove HPI m/m, while markets eye off Wednesday’s CPI y/y release (exp. 3.5%, prev. 4.0%) ahead of the Bank of England’s interest rate decision on Thursday evening. Both headline and core CPI were unchanged in January so policymakers will be hoping to see inflation head back down again in February.

NZD

AUDNZD touched 1.0720 lows on Friday morning before gradually increasing throughout the session, reaching for 1.0788 highs in Saturday’s early hours before retracing a tad to this morning's open at 1.0778. Activity in New Zealand’s manufacturing sector continued to show improvement in February, but remained in contractionary territory, with the BusinessNZ Manufacturing Index printing at 49.3 (prev. 47.5). This morning's BusinessNZ Services Index printed at 53.0 (prev. 52.2), showing further expansion in the services sector. The main Kiwi event this week will be their GDP q/q, on Thursday.