Dovish Central Bankers Elevate AUD
AUD
The Aussie Dollar appears to be in a resurgence phase due to stabilizing US Dollar conditions, advancements in the ASX 200 index, the recent (slight) increase in GDP and a minor rebound in Iron Ore prices. Last night’s dovish commentary from Fed Chair Powell (“We are not far” – from cutting interest rates) also weakened the USD, providing the AUD with breathing room to gain further traction. The ASX closed yesterday’s session +0.4% higher with gains in financials and technology, while Asian equities were mostly lower led by the Nikkei’s -1.2% and Hang Seng’s -1.3%. No major Aussie data today, while tomorrow we’ll see China's CPI y/y (exp. +0.3%) and PPI y/y (-2.5%). This comes after Beijing recently set ambitious economic targets for 2024, including a 3% goal for Consumer Price Inflation (CPI) for the year. In January, China saw CPI fall by an annualized rate of -0.8%, the largest decline in over 14 years. The stark contrast to Beijing’s +3% target shows further work needs to be done. If achieved, we can expect the Aussie Dollar to benefit greatly.
USD
AUDUSD soared to near-7-week highs of 0.6624 in the overnight session, currently holding ground to open this morning at 0.6618. This comes after Fed Chair Powell testified (again) about monetary policy before the Senate Banking Committee in Washington DC, indicating “Interest rates right now are well into restrictive territory. They’re well above neutral”. The Fed will cut interest rates when it has confidence that US inflation is on track to hit 2%, with Powell stating, “We are not far from it”. The positive session for equities saw some indices reach new record highs, with the Nasdaq +1.5%, S&P +1.0% and Daw +0.3%. Employment data for Feb will be released this evening, including the Unemployment Rate, Non-Farm Employment Change and Average Hourly Earnings m/m. The figures will likely impact expectations for monetary policy and the economic outlook, with particular focus on whether the pace and breadth of payrolls gains seen in January persisted.
EUR
AUDEUR reached 5-week highs of 0.6082 overnight after the European Central Bank once again held its key interest rate at 4.5%, while hinting at a June rate cut which led to Euro weakness. The rate opens this morning at 0.6046. Overnight, the ECB acknowledged most measures of underlying inflation have eased, although domestic price pressures remain somewhat high, in part owing to strong wage growth. Even so, ECB Staff presented a more positive view on Eurozone inflation, with the forecast for 2024 lowered to an average of 2.3%, from the previously reported 2.7%. The DAX and CAC gained 0.7% and 0.8% respectively. This evening, we’ll see German Industrial Production m/m, German PPI m/m, the French Trade Balance and Revised Eurozone GDP q/q.
GBP
AUDGBP spiked to 2-week highs of 0.5185 in the overnight session, retracing a tad to open this morning at 0.5163, being higher than yesterday morning. The FTSE gained 0.2%. Yesterday’s Halifax HPI m/m landed at +0.4% (exp. +0.8%), showing UK house prices rose for the fifth consecutive month. No major data until the Claimant Count Change and Average Earnings Index 3m/y, next Tuesday evening.
NZD
AUDNZD sits at 1-month highs this morning, having peaked at 1.0730 a few hours ago before opening today at 1.0721. We have no major releases from our Kiwi friends until Thursday March 21, being the GDP q/q print. Next Wednesday, we’ll see the Food Price Index (FPI) m/m. The NZD has been gradually weakening since the Reserve Bank of New Zealand held the Official Cash Rate at 5.5% on Feb 28, having trimmed its projected path for future policy (now forecasting peak rates at 5.6%, down from 5.7%).