US NFP Report in Spotlight
AUD
The AUD starts the day either stronger or flat against most major currencies. This comes after risk recedes further as markets scale back concerns of a global trade war. Asian equity indices finished the day upbeat, Nikkei +0.6%, Hang Seng +1.4%, and Shenzhen 300 +1.3%. The ASX 200 performed well, up +1.2% as financials and consumer discretionary dominated gains. Yesterday, the NAB Quarterly Business Survey showed business conditions held steady in Q4 as businesses wrapped up a challenging year. There was a slight improvement in business confidence, probably boosted by the prospect of RBA rate cuts, although confidence remains in negative territory. There’s no local or Chinese economic data on the calendar today. China’s consumer and producer inflation figures are due on Monday. Consumer prices are expected to have edged up to +0.4% y/yin January, up from +0.1% in December, largely driven by food prices.
USD
Relatively subdued trading over the past 24h saw the AUDUSD pair move from 0.6255 lows in yesterday’s session before opening this morning at 0.6280, being flat on yesterday morning. Another soft session on Wall St. saw the Dow Jones trading -.5%, the S&P 500 -.1%, and the Dow Jones unchanged entering the final hours of trade. Little meaningful US data overnight. Tonight will bring the key Non-Farm Jobs Report for the US. Despite the Federal Reserve’s historic and aggressive rate-hiking campaign, the US labour market – much like the broader economy – has remained strong and has kept rolling along right into one of the longest periods of employment expansion in history. Consensus estimates are for the Unemployment Rate to remain at 4.1%, with a net gain of about 170k jobs last month. As always with the Non-Farm Report, if the figures land off-expectations, we’ll likely see currency volatility.
EUR
AUDEUR opens a little higher at the 0.6050 resistance level, having tested this a handful of times since mid-December only to fall off again. This time, volatility surrounding global trade war concerns could be what the pair needs to shoot higher. Overnight, German Factory Orders m/m were forecasted for only a 1.9% increase but reasonably surpassed and came in at 6.9%. The DAX and CAC equity indices each closed 1.5% higher. Eurozone Retail Sales m/m came in under expected at -0.2% rather than a forecasted -0.1%, giving further weakness to the Euro. It’ll be another fairly quiet day for the Euro with data coming out of Germany and France, German Industrial Production forecaster to drop by 0.7% and the French Trade Balance to go from a previous drop of 7.1B to 5.3B.
GBP
The AUDGBP continues to rise this morning, still at weekly highs at 0.5052 after the Bank of England cut the Official Bank Rate by 25bps to 4.5%, as forecasted. The decision, which saw two members vote for a more aggressive 50bps cut, has caught markets slightly off-guard. But the overall message is a gradual one and they’re sticking to their call of four rate cuts in total this year. UK equities also showing positive movements closing in the green with the FTSE +1.2%. BOE Gov Bailey will be speaking this morning at the City UK annual dinner, previously proven to result in market volatility as traders attempt to decipher interest rate clues. As head of the central bank, which controls short term interest rates, he has more influence over the nation's currency value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy. Only low-tier UK data for the remainder of the week, with the Halifax HPI set for release this evening.
NZD
AUDNZD hit lows of 1.1035 yesterday before spiking to 1.1076 but actively dropping this morning to 1.1064. The Kiwi highlight this week was Wednesday's jobs data. Employment Changes q/q coming in above forecasted with only a drop 0f 0.1% and the Unemployment Rate ticking up to 5.1%, marking the largest annual increase in over 15 years.