Dovish USD Commentary Lifts AUD
AUD
A positive night for risk sentiment see’s the Aussie Dollar open higher against all majors. This comes after Fed Chair Powell announced we can expect to see interest rate cuts in the US this year. Asian Equities closed mixed with the ASX +0.1%, Shanghai Comp -0.3% and Nikkei flat. Yesterday, we saw the release of Australia’s GDP q/q which met forecasts at +0.2% (prev. +0.3%). This result comes as Aussie households struggle under the weight of higher borrowing costs, adding to the risk the Reserve Bank of Australia may be forced to start lowering policy rates sooner than other central banks, keeping the Australian dollar under pressure. A quiet day for local data only seeing the release of the Goods Trade Balance, as well as China’s Trade Balance and USD-Denominated Trade Balance, which aren’t expected to have too much of an impact on markets.
USD
The AUDUSD pair gained traction overnight, reaching highs of 0.6581 as risk sentiment improved off the back of dovish commentary from Fed Chair Powell. The pair opens this morning at 0.6563. US Equites closed in the green with Dow Jones +0.2%, S&P 500 +0.3% and NASDAQ +0.7%. US JOLTS Job Openings for January printed at 8.863M, down from 8.889M though above expectations of 8.850M. US ADP employment for February printed at 140k, up from 111k though a little below forecasts of 150k. Both data pieces did little to move currencies, as markets awaited Fed Chair Powell's Testimony. The US Dollar began to show weakness after Powell stated that rates had likely peaked in the current cycle and that we can expect to see rate cuts sometime later this year once the Fed had more confidence that inflation was back near target. Looking to the night ahead, we have a myriad of data to be released with the standout events being the Unemployment Claims, FOMC Member Mester Speaks and Fed Chair Powell continues his testimony.
EUR
The AUDEUR regained the 0.60 handle overnight, reaching highs of 0.6032 before slightly dropping off to open this morning at 0.6023. European equities closed higher with the DAX +0.1% and CAC +0.3%. Yesterday we saw German Trade Balance come in better than the expected 21B at 27.5B. Eurozone Retail Sales came in on expectations of 0.1%, jumping from -0.6%. Tonight, the European Central Bank will announce its monetary policy decision with market expectations of another Main Refinancing Rate hold at 4.5%. Although growth in the Eurozone has stalled and the ECB may revise down inflation forecasts, Preside Lagarde and other Members of the Governing Council have previously indicated June is a more likely time for cuts to be considered. By the June meeting there will be more information on wage growth in Q1, which will play an important role in the ECB's thinking.
GBP
The AUDGBP pair saw decent gains overnight, opening around 30 basis points higher at 0.5151, being up about 1.5% over the past 2 days. UK equities closed slightly higher with the FTSE +0.4%. Yesterday saw the Construction PMI come in slightly better than the expected 49 at 0.49.7. We also saw their Annual Budget Release, where Chancellor Jermery Hunt claimed they can now help families with permanent tax cuts. Notably, he sees annualised UK inflation falling below 2% within the next two months. A quieter day ahead with only the release of the Halifax HPI m/m.
NZD
The AUDNZD regained the 1.07 handle, reaching highs of 1.0720 before slightly dropping off to open this morning at 1.0706. No data out yesterday, however, this morning we saw their Manufacturing Sales q/q which read at -0.7% compared to previous readings of -2.8%. No new data out for the rest of the week.