ECB to Cut Rates Tonight

AUD

Economic uncertainty caused the Aussie Dollar to perform mixed throughout yesterday, with weaker GDP figures contrasted with RBA governor Bullock’s hawkish commentary, indicating she ‘won’t hesitate to act’ by lifting interest rates, should inflation’s retreat stall. The ASX closed +0.4% higher with Australian commodities staying stable after yesterday’s downturn. Asian equities closed lower as Hang Seng, Shenzhen and Nikkei fell -0.1%, -0.6% and -0.9%. Australia’s GDP q/q slightly missed its target (0.1% vs 0.2% expectations), but there were minimal effects on the AUD given RBA Bullock's commentary. No new major data released until Australian employment figures are announced on June 13.

USD

AUDUSD fluctuated throughout yesterday's session, reaching a weekly low of 0.6626 before recovering to open higher at 0.6652 after US employment data continued to be weaker than expected. Wall Street rose as a result of the news, with the Nasdaq rising +2%, the S&P 500 +1.1%, and the Dow Jones +0.3%. The ADP Non-Farm Employment Change fell short of expectations, printing at 152k (exp. 173k, prev. 188k) and signaling further cooling in the US labour market. Economists expect the state of the US job market to continue for the foreseeable future and boost expectations for two rate cuts from the US Federal Reserve. Tonight’s Unemployment Claims will shed further light on this paired with tomorrow night's important labour report, including the Unemployment Rate and Non-Farm Employment Change.

EUR

AUDEUR opens slightly higher at 0.6118, reaching 0.6126 highs before dropping to 0.6098 and improving overnight. The DAX and CAC closed +0.9% each. A lot of low-tier Eurozone Services PMIs were released and exceeded expectations, causing the AUDEUR to fall despite the RBA’s hawkish comments on future interest rates. European Producer Price Inflation (PPI m/m) was also a lot lower than expected (-1.0% vs -0.6%). Tonight will bring the European Central Bank interest rate decision. A rate cut to 4.25% is priced in, with inflation figures showing a further decrease. The ECB’s commentary will dictate future expectations of the Euro, potentially bringing movement for currency markets. Markets are currently pricing in only a 10% chance of a back-to-back cut in July. 

GBP

AUDGBP opens flat at 0.5199, having reached highs of 0.5215 due to the RBA’s hawkish commentary yesterday before retreating back to the 0.5190 - 0.5200 range. The UK Final Services PMI met expectations exactly last night. Tonight will see GBP’s Construction PMI released, potentially creating volatility in the Pound overnight.

NZD

AUDNZD dropped to 1.0738, consistently falling throughout yesterday’s session. The pair is currently at an 11-week low. Today will see ANZ Commodity Prices (m/m) released, and Manufacturing Sales (q/q) will be released tomorrow morning.