ECB Loosens the Brakes

AUD

AUD is up against all major currencies, with all major commodities doing well in recent data. Iron Ore is up 2.9% and Oil shot up 2.0%, whilst Natural Gas rose 1.5% and Copper is also up 1.4%. The AUD also benefited from improvements in global risk sentiment, bringing some respectable increases in all major global equities. Asian equities finished mostly higher on Thursday, the Nikkei and Hang Seng up 0.6% and 0.3% respectively, and the Shenzhen closed -0.1%. The ASX climbed 0.7%, led by IT and financials. The late half of this week has shown limited Aussie data, with the only release being the Goods Trade Balance which was 6.55B, much higher than expected from its previous 4.84B. Today at 1pm RBA Deputy Gov Hauser Speaks. Central banker public engagements are often used to drop subtle clues regarding future policy shifts. Next week's data also starts off slow, with Wednesday being the first major data release - China's CPI and PPI.

USD

AUDUSD opened up at 0.6668 which is a 0.36% climb since yesterday's opening rate. Wall Street was subdued overnight with the Dow Jones closing +0.2%, S&P 500 -0.1%, and Nasdaq -0.2%. Last night, US Unemployment Claims were greater than expected, feeding into the recent narrative of the softening labour market. Tonight, we'll see the labour report, including Average Hourly Earnings m/m, Non-Farm Employment Change and the Unemployment Rate. In terms of the labour report, markets are anticipating a slight moderation from last month’s strong jobs growth, with wages and the Unemployment Rate (3.9%) expected to come in roughly in line with recent trends.

EUR

AUDEUR opens a little higher at 0.6124, having peaked at 0.6134 before the European Central Bank interest rate decision (25bps cut - as expected), then falling to 0.6095 in the aftermath. The DAX and CAC each gained 0.4%. The ECB lowered their Main Refinancing Rate for the first time since 2019, bringing it to 4.25%. Notably, President Lagarde expressed increase confidence in “the path ahead” as they seek to be a forward-looking central bank again. Importantly, the cut doesn’t necessarily mark the start of an easing cycle given there is still further progress to be made in the fight against inflation. It is the first time that the ECB has cut rates after a tightening cycle without facing any sort of recession or economic crisis. Looking forward this afternoon we will have German Industrial Production m/m and revised GDP q/q for the Eurozone.

 GBP

AUDGBP opened a little higher at 0.5212, having bottomed out at 0.5191 around lunch time yesterday. This comes after improved risk sentiment helped the Aussie Dollar gain ground. The FTSE gained 0.5% in yesterday’s session. Yesterday's British Construction PMI showed activity rising at the fastest pace in two years during May, printing at 54.7 from the previous 53.0. This afternoon we have the Halifax HPI m/m expected to increase from 0.1% to 0.3%.

 NZD

AUDNZD opens a little higher at 1.0762, although still near 3-month lows. Yesterday saw ANZ Commodity Prices m/m increased to 1.1% whereas this morning Manufacturing Sales q/q. No Kiwi Data over the next few days.