Softer Risk Sentiment Undermining AUD
AUD
The Aussie Dollar continues its descent without further development in the ongoing souring of global risk sentiment. With the RBA watching our business indicators closely, yesterday's Purchasing Manager Indices (PMIs) fell slightly, with stronger services activity offsetting ongoing weakness in our manufacturing sector. Asian equities closed weaker across the board, the Nikkei -1.1%, Hang Seng -0.9%, and Shenzhen -0.6%. The ASX fell slightly by -0.1%, pulled by real estate and energy. Commodities pricing did not help our currency, with the majority underperforming with Gold -0.8%, Silver -0.9%, Iron -0.9%, Copper -1.8% and just Crude Oil and Natural Gas up at +0.7% and +3.6% respectively. A quiet day ahead with no Aussie or Chinese data set to release for the remainder of the week, leaving the AUD to react to global factors.
USD
AUDUSD opens at 7-week lows of 0.6577, continuing its fall since last Monday given USD strength in the aftermath of political uncertainty in the US, paired with AUD weakness off further deterioration in global risk sentiment. Yesterday's US Flash PMIs showed US business activity growth edging up to its fastest pace in 27 months, signaling a strong start to Q3 (Flash Services PMI at 56.0, although off-set by Flash Manufacturing PMI at 49.5). US equities finished steeply in the red with Dow Jones -1.2%, S&P 500 -2.3% and NASDAQ -3.6% after poor earnings from Tesla and tech stocks. Tonight, the quarter-on-quarter growth of the US will be released (markets expecting Advance GDP q/q at +2.0%), which will shape perceptions of the strength of the US economy and expectations for future monetary policy decisions.
EUR
AUDEUR also continues its descent to 0.6068 this morning, given ongoing AUD weakness as risk sentiment sours. Whilst AUDEUR has been deteriorating due to global uncertainty, its weakness was slightly offset from weak private sector output figures out of Europe last night. Germany and France both posted weak Flash Services and Manufacturing PMI’s, all (with the exception of French Services) missing market expectations - and solidified by the overall Eurozone figures also missing expectations, showing a near-stagnation of Europe’s private sector in a waning economic recovery attempt. Euro equities also underperformed, with CAC and DAX -1.1% and -0.9% respectively. Tonight, we have the German ifo Business Climate, expected to paint the picture of slow business recovery at 88.9 against a previous 88.6. In the later hours, European Central Bank (ECB) President Lagarde will also be delivering a speech in Paris.
GBP
AUDGBP has furthered recent steep declines, losing the 0.51 handle to open at 10-month lows of 0.5097 this morning, despite little surprises in their business sector figures yesterday. Yesterday, private sector activity numbers in the UK expanded at a solid and faster rate in July, with Flash Manufacturing PMI adding +0.9 from previous to show expansion at 51.8, whilst Flash Services PMI added +0.3 from June to also show expansion at 52.4. UK equities reacted meekly, with the FTSE -0.2% for the day. No more figures out of the UK this week, although G20 Meetings begin on Friday where clues towards UK monetary policy shift may be sprinkled in.
NZD
AUDNZD stands alone as the only currency pair to remain flat in its morning open at 1.1098. Not particularly surprising with no figures out at all yesterday, and none set to release until next Wednesday where we will have Building Consents m/m and ANZ Business Confidence.