US Fed to Unwind Rates Tonight
AUD
The Aussie Dollar opens higher against all the majors as global risk sentiment continues to improve, while commodities mostly strengthened in yesterday's session. Key performers were Natural Gas +5.0%, Sugar +4.0% and Crude Oil +1.7%. Iron Ore climbed +0.6% while Gold and Silver rose +0.2% and +0.1% respectively. Asian equities ended the day mixed, Nikkei -1%, Hang Seng +1.4%, and Shenzhen -0.4%. Locally, the ASX pushed +0.2% as all sectors closed higher, with info tech and real estate performing the best. No key economic data has been released so far this week for Australia, with our main event being key labour data tomorrow morning. Markets expect the Unemployment Rate to hold at 4.2%, while employment to increase by 26.4k, being nearly half of the previous release. We can expect some volatility for the AUD if the data misses expectations by a wide margin.
USD
The AUDUSD continues trading at 2-week highs of 0.6759 with the currency pair moving sideways over the past 24 hours in anticipation of the Fed's important interest rate decision early tomorrow morning. Wall Street closed flat, with the exception of NASDAQ +0.2%. Retail Sales figures were mixed last night – showing a slight growth over the past month and easing concerns over a US recession, but Core Retail Sales m/m (which excludes automobile sales) still released lower than expected, showing only a +0.1% uptick. Despite some better-than-expected US data of late, financial markets are gunning for a 50bps cut from the Fed tomorrow morning with 41bps currently priced in. Whether the FOMC Members are as certain is another story, with some of the central bank voting Members likely to opt for a 25bps cut instead. Given the air of mystery surrounding what the Fed will do, the ultimate decision & Press Conference could be more impactful than usual, with currency swings all the more likely for both the AUD and USD.
EUR
The AUDEUR opens higher this morning at 0.6077, pushed higher by improving risk sentiment and signs of economic weakness in the European economy. The German ZEW Economic Sentiment missed heavily, showing increasing pessimism in economic conditions in Germany. The DAX and CAC were undeterred, each closing +0.5%. No major Eurozone economic data will be released for the rest of the week.
GBP
The AUDGBP opens higher at 0.5133, trading higher after improving risk sentiment over the past 24 hours. The FTSE closed +0.4%. No key economic data was released this week so far. This afternoon will bring the important CPI y/y release where consumer prices are expected to have increase +2.2% from a year ago. This is the last key economic data before their interest rate decision on Thursday night. The Bank of England is expected to hold interest rates at 5.00%.
NZD
AUDNZD opens slightly higher at 1.0917, breaking the 1.0900 handle at midnight and staying at current levels since. No key economic data has been released this week so for the Kiwis. Their main event this week will be GDP q/q set for release tomorrow morning and forecasted to drop to -0.4% (previously 0.2%).