AUD Recovers as Trade War Risk Recedes
AUD
The Aussie Dollar continues its upward momentum, opening higher against the majors apart from the NZD given improved risk sentiment after markets were relieved that China didn’t hit back overly hard against Trump's imposed tariffs. Asian equities ended the day mixed, with the Nikkei +0.1%, while the Shenzhen and Hang Seng fell -0.6% and -0.9% respectively. Locally the ASX 200 finished +0.5% as info tech and materials dominated advancements. Commodities also followed suit with precious metals down with Gold and Silver -0.3 and -0.6 respectively, while Iron ore was +0.3%, and Copper being the highest performer +2.1%. Looking at today, nothing major set for release with only Goods Trade Balance, and NAB Quarterly Business Confidence at 11:30am and no further data for the remainder of the week. The next major data, and highlight for next week, will be China's inflation figures, on Monday.
USD
The AUDUSD opens higher this morning at 0.6281, up nearly 3.5% from Monday's lows, after the USD fell to its lowest in more than a week as investor's nerves about a global trade war abated. Some mixed data overnight with ISM Services PMI release indicating expansion for the 53rd time in 56 months, however, lower than forecasted coming in at 52.8 from 54. Wall Street closed in the green with the Dow Jones +0.5%, S&P 500 +0.2%, and the NASDAQ flat. It will be another busy data release day for the US with FOMC Member Jefferson speaking later this morning at 11:30am and Member Waller speaking overnight. The main event will be Unemployment Claims which is expected to increase from 207K to 214K.
EUR
The AUDEUR rises to near two-week highs, opening at 0.6038 after some Eurozone Final Services PMIs came through lower than forecasted last night, alongside with PPI m/m showing industrial producer prices increase by only 0.4% from the forecasted 0.5% in December. Eurozone equities closed mixed with the DAX +0.4%, and while the CAC -0.2%. It will be another light data day for the Eurozone with only Retail Sales set to decrease by -0.1%.
GBP
The AUDGBP opens higher this morning, hitting weekly highs at 0.5024, after UK Final Services PMI missed forecasts at 50.8, signaling a sustained expansion of business activity. However, incoming new work declined in January and the pace of job shedding accelerated to its sharpest for four years. UK equities closed in the green with the FTSE +0.6%. Big day for the UK today as all eyes will be focused on the Bank of England's Official Bank Rate decision at 11pm tonight, with forecasts expecting the Monetary Policy Committee will cut its policy rate by 25bps to 4.5%. While policymakers kept rates unchanged in December, the messaging was dovish, and three of the nine members voted for a cut amid concerns around the weakening activity. Eight of the nine are expected to vote for a cut tonight. The data out since then will only have confirmed those concerns, with employment and monthly GDP softening. Signs of labour market loosening should also allay policymakers’ concerns about still-elevated wages growth.
NZD
AUDNZD opens lower this morning 1.1045 with both currencies strengthening off the back of improved risk sentiment, given reduced concerns around a potential global trade war. Yesterday, the NZ Unemployment Rate printed at 5.1%, marking the largest annual increase in over 15 years as the RBNZ's interest rate hiking campaign continues to impact the Kiwi economy. Young people are bearing the brunt, with youth unemployment hitting 23%. The RBNZ has pencilled in a 50bps interest rate cut later this month. No data release today, as it will be a banking holiday with our Kiwi neighbours for Waitangi Day.