Dovish Fed Weighs on the Dollar
AUD
The Aussie Dollar begins the week lower against all majors bar the USD. This represents a continuation of current themes: Souring global risk sentiment, geopolitical tensions, a sluggish Chinese economy and the upcoming inauguration of US President-Elect Trump later this month… All of which are dragging on the AUD. The USD weakened off dovish remarks from the Federal Reserve’s Barkin over the weekend. Asian equities finished the week mixed with the Hang Seng +0.7%, CSI 300 -1.2% and the ASX +0.6%, while the Nikkei remained closed. The first meaningful data points of 2025 are due this week, with China’s Caixin Services PMI due later today, Aus CPI on Wednesday as well as Aus Retail Sales and Chinese CPI on Thursday.
USD
AUDUSD opens flat at 0.6210, moving sideways over the weekend as both the AUD and USD weakened. The USD fell back from Thursday’s 2-year high as strength in stocks on Friday reduced liquidity demand for the Dollar. Losses were accelerated due to dovish comments from the Federal Reserve’s Barkin, who said the Fed doesn’t need to be restrictive as it once thought. A positive session on Wall St. to round out last week saw the Nasdaq close +1.8%, the S&P 500 +1.2% and the Dow Jones +0.8%. Saturday brought the ISM Manufacturing PMI which printed at 49.3, being above expectations and the previous figure. This represents a second month of improvement as orders and production pick up, suggesting the cloud over manufacturing may be starting to lift. The next major USD event will be the ISM Services PMI and JOLTS Job Openings in Wednesday’s early hours. The Non-Farm Employment Report on Friday evening will be main event this week.
EUR
AUDEUR lost momentum over the weekend, opening lower to start the week at 0.6029 after German unemployment increased less than anticipated, suggesting the labour market is weathering the latest economic rough patch. Joblessness rose by 10,000 in December, while economists had predicted an increase of 15,000. Eurozone equities closed in the red with the DAX -0.6%, and the CAC -1.5%. Looking at today there will be a myriad of Final Services PMI’s releasing for the Eurozone however all eyes will be focused on the German Prelim CPI m/m, expected to increase from -0.2% to 0.3%.
GBP
The AUDGBP coupling lost the 0.50 handle over the weekend, starting the week lower at 0.4995 despite worse-than-expected UK Mortgage Approvals and Net Lending to Individuals m/m late Friday evening. The FTSE also starts the week in the red, down 0.4%. No major news set for release today with only Final Services PMI later this evening set to remain flat at 51.4. The next piece of data to keep an eye out for would be the UK’s Construction PMI set for release tomorrow night which is forecasted to decrease from 55.2 to 54.3.
NZD
The AUDNZD took a hit Saturday morning to start the week off lower at 1.1061 with no real catalyst for the drop. It will be another quiet week for our Kiwi neighbours with only 2 events on Wednesday: The GDT Price Index and ANZ Commodity Prices.