ECB Cuts as Growth Dwindles
AUD
The Aussie Dollar opens either a little higher or flat against most majors after another positive day for risk sentiment and a widely anticipated 25bps cut from the European Central Bank. It was a quiet day both locally and from China, whilst equities finished in the green with the ASX +1.1%, Nikkei +3.4% and Hang Seng +0.8%. Commodities saw Crude Oil +2.8%, Gold and Silver +0.2%, Iron Ore +0.0% and just Natural Gas in the negative -3.3%. A big weekend ahead with Chinese Retail Sales y/y and Industrial Production y/y set for release on Saturday. Earlier this week we saw sluggish importing figures from China, highlighting soft domestic consumption (although exports were strong), so Retail Sales figures will further develop the narrative for the world's second-largest economy.
USD
AUDUSD opens higher at 0.6725 after global markets fully price in a 25bps cut from the Feds next week, following the European Central Bank's footsteps, having cut 25bps last night. Producer Price Index figures last night were a tad stronger than expected with Core PPI m/m at 0.3% and PPI m/m at 0.2%, further reducing expectations of a 50-basis point cut from the Fed, especially after a slightly stronger Core CPI print earlier in the week. The US Jobs report last night provided little clarity as Unemployment Claims came in close to expectations at 230K for the week. Wall Street benefited from the positive session for risk sentiment, with NASDAQ +1.0%, S&P 500 +0.7% and Dow Jones +0.6%. No meaningful figures out of the US tonight, however, over the weekend we have Preliminary University of Michigan Consumer Sentiment and Inflation Expectations, although the Fed will likely look to Retail Sales (next Tuesday) as the final piece of data to influence their interest rate decision next Thursday.
EUR
AUDEUR inches slightly higher to 0.6072 after the European Central Bank delivered a 25bps interest rate cut overnight. ECB President Lagarde noted the decision was unanimous, however, also highlighted the downside risks to the economic outlook, adding that inflation data, while likely to drop in September, was not yet satisfactory and likely to climb a little after. The central bank is juggling an economic slowdown alongside an anticipated uptick in inflation, complicating its ability to deliver guidance on the timing of future interest rate cuts. While December is widely expected by markets, Lagarde told reporters it would be data dependent. European equities enjoyed the decision, with DAX +1.0% and CAC +0.5%. Tonight, we just have French Final CPI m/m at +0.6% (same as previous) and overall Eurozone Industrial Production m/m set to decrease to -0.6% from its previous -0.1%.
GBP
AUDGBP opens flat at 0.5121 after an uneventful day yesterday, as all markets looked to the interest rate decision out of Europe instead. UK equities rallied by 0.6% off the back of the expected ECB cuts, with the only piece of UK data being RICS House Price Balance, which showed housing prices increasing by +1% for the month of August. Looking forward, we’ll have Consumer Inflation Expectations released tonight as a leading indicator to possible future inflation.
NZD
AUDNZD opens a tad lower at 1.0871 with the BusinessNZ Manufacturing Index printing at 45.8, reflecting further contraction in the Kiwi manufacturing sector. The figure is a little less bleak than the previous reading, potentially showing the positive effects of the RBNZ’s 25 basis point last month. No more figures out today or over the weekend, but on Monday morning we’ll gain insight into the NZ services sector as the BusinessNZ Services Index releases at 8:30am.