Aussie Dollar Advances on Dovish Fed
AUD
The Aussie opens higher across the board after dovish US Fed commentary this morning, with US central bankers hinting at 3 potential interest rate cuts later in the year, weakening the US Dollar and allowing the AUD to advance. Asian equities crept higher yesterday with the Nikkei up +0.6%, Shanghai Comp +0.6% but ASX fell short at -0.1%. Commodities had a mixed run, with Crude Oil -2.1%, Natural Gas -3.1%, Gold +1.2%, Silver +2.3% and Iron +0.4%. As expected, China's Loan Prime Rates were held yesterday after last month's 25bps cut to the 5-year rate (the largest drop in recent years). A lower LPR is expected to shore up the credit and property markets, reduce financial costs and give way to China's economic recovery. The focus today will be on our employment data at 11:30am, where our Employment Change is anticipated to have risen 39.7K m/m in February, following two months of weak readings that have been affected by seasonal changes. The Unemployment Rate is also expected to fall 0.1% to 4.0% due to seasonal changes.
USD
AUDUSD opens higher today at 0.6592 after Fed Chair Jerome Powell reiterated rate cuts are coming later this year. The FOMC decision to hold their rates at 5.50% came with no surprise, however, markets did not price in the dovish commentary following. Most notably, despite strong US labor market figures, Powell stated that it would not affect their plans of cutting, stating “Strong hiring in and of itself would not be a reason to hold off on rate cuts. No, not all by itself.” US equities ran with the dovish commentary, closing strongly in the green with the Dow Jones +1.0%, S&P 500 +0.7%, and NASDAQ +1.2%. Looking forward, tonight we have their Unemployment Claims coming in at 11:30pm, expected to stay relatively flat from previous at 212K claims.
EUR
AUDEUR opens higher at 0.6032 off the back of a stronger AUD overall due to a dovish US Fed, with minimal data coming out of the Eurozone over the past 24h. President Lagarde of the European Central Bank spoke at Frankfurt, remaining neutral on interest rates by saying the ECB would not commit to a certain number of rate cuts even after it starts reducing borrowing costs, stating “our decisions will still have to remain data dependent and meeting-by-meeting, respond to new information as it comes in”. Equities reacted mixed to her commentary, with DAX up +0.2% and CAC -0.5%. Onward looking, tonight we have Flash Manufacturing and Services PMI coming out of the Eurozone - Still expected in contractionary level but approaching the 50.0 break-even level.
GBP
The AUDGBP coupling opens higher this morning at 0.5151 after UK inflation came slightly weaker than expected yesterday at 3.4%. Even so, the FTSE was undeterred, closing flat. Busy day ahead for the UK with the release of their Flash Manufacturing/Services PMI’s, however all eyes will be focused on the Bank of England making their March policy decision which is expected to be held at 5.25%. Governor Bailey said in February that the key question was how long rates would need to be kept at the current level before being cut. It is expected that the MPC will wait until August to implement its first cut, once it has seen a few more inflation and wages releases.
NZD
The AUDNZD follows suit in the green at 1.0832, having reached 4-month highs of 1.0851 this morning, riding the coattails of the stronger Aussie and a weak NZ GDP q/q print this morning. New Zealand’s GDP q/q was expected to increase by +0.4% from previous -0.3%, with markets expecting a stronger outcome as seen in the Business Survey data and Activity Index. However, it missed all expectations and printed meekly at -0.1%. No meaningful data out today, but Trade Balance will be out Friday morning, expected to increase 150M from previous to land on -825M.