Risk Sentiment Sours Amid Recession Fears

AUD

The AUD opens lower against the majors, making steady gains throughout yesterday before falling off in the evening after President Trump declined to rule out a recession in the US, with risk-sensitive currencies taking a hit. Asian equities started the week mixed with the Nikkei +0.4%, Hang Seng -1.9% and the CSI 300 -0.4%. The ASX 200 closed up 0.2% in a slow day. A quiet week ahead on the data calendar. Today, we’ll see Westpac Consumer Sentiment and NAB Business Confidence.
 

USD

AUDUSD reached 0.6330 highs near midnight before falling off to open at 1-week lows of 0.6273 after increasing concern over tariffs and US economic growth weighed on risk sentiment. Chinese tariffs on US agricultural goods began in response to US tariffs that went into effect on China last week. Trump also declined to rule out a recession, with Wall St. taking a hit, seeing the NASDAQ’s worst session since 2022, down -4.1%. The S&P 500 and Dow Jones fell -2.7% and -2.1% respectively. At some point over the next 24 hours, Trump is expected to speak at the White House regarding his latest bout of executive orders, potentially bringing more currency volatility. Tonight we’ll see JOLTS Job Openings data. Tomorrow evening will be the highlight for the week: US consumer inflation. Year-on-year CPI is expected at 2.9% and 3.2% for the headline and core figures respectively. Both would be 0.1% lower than the January print.
 

EUR

AUDEUR gained almost 1% yesterday, reaching 0.5845 highs in the evening, then reversed all gains after risk sentiment took a hit, touching fresh 5-year lows of 0.5788 before kicking off today at 0.5792. The DAX fell -1.7% and the CAC fell -0.9%. German Industrial Production increased 2.0% m/m, due in particular to the increase in the automotive industry. There’s no Eurozone data for the next day or so. Tomorrow evening, European Central Bank President Lagarde will be speaking at the ECB Watchers Conference on monetary policy in Europe.
 

GBP

AUDGBP attempted to reclaim the 0.49 handle overnight, briefly touching 0.4905 highs before falling off to start the day at 0.4874, flat on yesterday’s open. The FTSE gave up 0.9% yesterday. The economic calendar is light until the end of the week’s January GDP report. The UK economy was stagnant in H2 2024. The economy was stagnant in Q3 and grew 0.1% in Q4. Growth is seen picking up to about 0.3% this quarter, but it may be front-loaded. Markets accept there is basically no chance of an interest rate cut from the Bank of England at the March 20 meeting.
 

NZD

AUDNZD fell steadily throughout the evening, continuing to flirt with the 1.10 support level, having tested it a few times since mid-December, opening today at 1.1024. Only a few pieces of data from the Kiwis this week. This morning, Manufacturing Sales q/q showed a 2.6% gain. Friday will bring the BusinessNZ Manufacturing Index and the monthly Food Price Index.