Risk-Off Returns Amid Trade War Uncertainty
AUD
The AUD opens mixed against the majors after a relatively stable 24 hours. Yesterday, data out of China showed GDP q/y printed at 5.4%, slightly above forecasts, and Industrial Production higher than expected at 7.7%. Although it’s believed that these figures may not be of much relevance after the latest advances in the global trade war have dramatically changed China's economic landscape. Asian equities reversed on the open, with the Hang Seng down -1.9%, the Nikkei -1.0%, while the Shenzhen managed 0.3% gains. The ASX 200 closed flat on the day, with financials offsetting an underperformance in energy stocks. Today we have Employment Data where Australian employment is predicted to rise by 60k in March, after a sharp 52k fall in February, mainly driven by a participation rate recovery. The Unemployment Rate is expected to lift slightly to 4.2%. On Monday, we have Chinese Loan Data to look out for.
USD
AUDUSD opens up by 30 basis points at 0.6372, touching highs of 0.6390 in the early hours, with the USD under pressure as markets favour safe-haven assets amid trade war uncertainty. This was most-recently driven by President Trump restricting Nvidia’s exports of high-end chips to China, causing the WTO to forecast an 80% fall in trade between the US and China. FED Chair Powell noted that the U.S. economy was in a solid position even as growth appeared to be slowing and noted that the economic impact and inflationary effects of tariffs were likely going to be larger than expected. This added to further risk-off sentiment, ending a brief spell of calm across financial markets. On Wall St., the Nasdaq closed -3.1%, the S&P 500 -2.2%, and the Dow Jones -1.7%. Later tonight, we have the US Unemployment Claims, which are expected to remain virtually unchanged at 225K individuals claiming unemployment in the past week.
EUR
AUDEUR opens slightly down at 0.5590. Yesterday, there was little in terms of relevant data, we had some lower tier CPI data come out unchanged and on expectations of 2.2%. European equities saw the Stoxx, DAX and CAC shed -0.5%. This evening, we have the European Central Bank's rate decision which is expecting an interest rate cut for the third time this year. Data from LSEG on Wednesday indicated markets are predicting a high probability (around 94%) of a standard 25 basis point cut, with a small chance (almost 6%) of a more significant 50 basis point reduction. Looking beyond the April meeting, the ECB's interest rate outlook is unclear and tied to White House policy decisions. Although economists generally expect another rate cut later in the year with its timing depending on future economic data and developments. The next relevant data would be out mid next week where we have an abundance of Manufacturing and Services PMIs.
GBP
AUDGBP opens up by about 0.5% at 0.4814 after slowly retracing a peak of 0.4827 in this morning's early hours. The FTSE lifted by 0.3%. Yesterday we saw data from the Office for National Statistics (ONS) released on Wednesday showing that the U.K.'s yearly inflation rate dropped to 2.6% in March, surprising analysts who had anticipated a higher figure of 2.7%. The market will be scrutinizing the Bank of England's policy statement on Thursday to gauge its assessment of the economic situation in the U.K. The deputy chief U.K. economist at Capital Economics was among those who observed that the cooling of inflation was not anticipated to be sustained, with inflation expected to rise to around 3.5% in the coming months. Looking forward we have the Manufacturing and Services PMIs.
NZD
AUDNZD opens essentially flat at 1.0735. Yesterday they had their q/q CPI come in above expectations of 0.8% at 0.9%. Rental costs were the biggest factor in the inflation increase, accounting for 14%. However, rent growth is now slower than in previous years. Next week looks relatively quiet with low tier data expected