Risk Back in Vogue, AUD Up
AUD
Improving risk sentiment paired with strong local employment figures allows the Aussie dollar to open mainly higher this morning against the majors. Risk is definitely back on in the wake of the US's "jumbo rate cut" earlier in the week, spurring Asian equities on to close yesterday’s session in the green with the ASX +0.6%, Shanghai Comp +0.7% and Nikkei +2.1%. Commodities were mixed, with Iron Ore +1.3%, Gold -0.1%, Silver -0.9% and Copper +1.1%. Yesterday we saw this week’s main event in the form of Aussie Employment Change and Unemployment Rate. Although we saw the Unemployment Rate remain flat at 4.2%, what spurred AUD strength was the Employment Change which read higher than markets anticipated at 47.5k verses 26.4k with the participation rate in Australia holding steady 67.1% in August, compared to 67.1% in July. Meanwhile, Full-Time Employment decreased by 3.1K in the same period from 64.8K (revised from 60.5K) in the previous reading. Looking to the day ahead we will see China’s first data releases for the week, coming in the form of their 1-y and 5-y Loan Prime Rate which are expected to remain flat at 3.35% and 3.85% respectively.
USD
The AUDUSD reclaims the 0.68 handle, briefly touching new yearly highs of 0.6838 before dropping off slightly to open this morning still in a strong position at 0.6810. Wall street had a bumper session overnight with Dow Jones +1.3%, S&P 500 1.7% and NASDAQ +2.5%. US weekly jobless claims came in stronger than anticipated at 219k against estimates of 230k as the number of Americans applying for unemployment benefits fell to their lowest level in four months. Last night we also saw the Philly Fed Manufacturing Index read above expectations of -0.8 at +1.7 despite manufacturing activity in the region being mixed overall. These two data releases are the main culprit as to why the AUDUSD pair failed to maintain the higher level. A quieter night ahead to close what's been an eventful week, with only FOMC Member Harker speaking.
EUR
The AUDEUR reclaims the 0.61 handle, seeing 2-week highs of 0.6128 late yesterday afternoon before slightly retracing to open this morning still higher at 0.6103. European equities didn't miss out on the upturn in global sentiment, returning a solid performance to close yesterday’s session decently higher with the DAX +1.6% and CAC +2.6%. Nothing major of note on the data front yesterday for the Europeans, only seeing the German Buba Monthly Report and German Buba President Nagel Speak. A quiet weekend ahead with only the German PPI m/m and Eurozone Consumer Confidence, which will be followed by ECB President Lagarde speaking.
GBP
The AUDGBP opens somewhat flat at 0.5127 after briefly seeing 2-week highs of 0.5154 overnight before quickly retracing, following the Bank of England's Interest Rate announcement. British Equities followed the global trend and finished yesterday’s session in the green with the FTSE gaining just shy of one percent. The BoE kept Interest Rates on hold at 5% yesterday, we saw no major changes to the bank’s foresight as their statement was by and large a bland update of recent developments, sticking to a limited forward guidance approach. 8 out of 9 voting members voted to keep rates on hold, with only 1 lonely member voting in favour of a rate cut. This nearly unanimous result probably held what is a buoyant AUD at bay. Looking forward, tonight we await the release of Retail Sales m/m which is expected to drop from 0.5% to 0.3%.
NZD
The AUDNZD opens slightly higher this morning, reclaiming the $1.09 handle to open at $1.0913. Yesterday we saw New Zealand’s GDP contract less than expected, reading at -0.2% rather than the anticipated -0.4% in part due to a downward revision to the March quarter growth pace from 0.2% to 0.1%. Importantly, both the quarterly and annual figures were also stronger than the 0.5% and 0.7% figures forecast by the Reserve Bank of New Zealand.