Local Employment Report Due at 11.30 am

AUD

The AUD is generally higher against most major currencies barring the USD as risk aversion and inflation pressures were the focus of attention for currency markets overnight. Asian Equity markets were mostly down, the ASX fell for the third day in a row losing -0.15%, though the Hang Seng outperforming up +0.7%. Commodities were mixed with Gold losing out -0.1%, Copper down -1.7%, but Iron Ore managing to gain +0.8%. Forecasters are optimistic about Australia’s October labour force survey which is due at 11:30am this morning. It should start to reflect the early stages of the emergence from lockdowns on the east coast, is expected to have added 50K new jobs after losing 138K positions in September. The Unemployment Rate is expected to have ticked higher, from 4.6% to 4.7%, although the Participation Rate is seen to be improving from 64.5% to 64.8%. The reference period for survey responses was 26-Sep to 9-Oct, which pre-dated the major lifting of lockdowns in NSW, Victoria and the ACT (nearly 50% of the Australian population was still under stay-at-home orders). But it is expected that employment will have benefited from businesses preparing for lockdowns to end. Keep an eye out here.

USD

The AUDUSD continues to fall from recent highs as US inflation data saw the Greenback fight back, the pair trading at 0.7326 this morning. The catalyst was the US annual Consumer Price Index released early this morning, which soared to its highest level in three decades, hitting 6.3% year-on-year, and +0.9% in October. The record inflation data should advance the acceptance of reflationary fears, pushing the Federal Reserve towards faster scaling back of the easy money policies. The theme across currency markets was US strength, with the DXY up almost a whole 1% since this time yesterday. Wall St was worse off after the data came out with the NASDAQ -1.9%, the S&P 500 -1.0% and the Dow Jones -0.8%. What also weighed on US Equity markets was the risk-off atmosphere, which accelerated on the news that the cash-strapped China Evergrande Group has missed coupon payments by the end of a 30-day grace period, pushing the developer again to the edge of default. Some softer data out of the US was a non-factor in the USD run, with Weekly Jobless Claims a little weaker than expected with initial claims falling marginally to 267k, though higher than expectations of 260k.

EUR

The AUDEUR managed to pick up some ground to trade at 0.6381 at time of writing. The US dominance weighed in on the Euro despite inflationary pressures also weighing in on the Eurozone. Germany’s council of economic advisers urged the ECB to publish a strategy for normalizing its ultra-expansive monetary policy in light of building inflation risks. Adding that if the ECB acts too late, temporary inflation drivers will become entrenched, hurting the economy. The recommendation comes against the backdrop of complex coalition talks in Berlin to replace outgoing Chancellor Angela Merkel, and at a time when the country’s inflation rate is approaching 5%.

GBP

The AUDGBP also finding some strength, trading at 0.5464 this morning. The Pound remains see-sawing after the Bank of England wrong-footed currency markets last week, with it widely expected the BoE to hike interest rates due to rising inflationary pressure and comments from policymakers in the lead up to the meeting. However, the central bank signalled it could raise interest rates in the ‘coming months’ if the employment market improves as expected, while the Bank waits to see the effect of the furlough scheme ending. The reference period for the UK unemployment data due for release on Tuesday is before the job support scheme ended, but investors will look to wage growth data after BoE Governor Andrew Bailey said they will have to act if inflation begins to push wages higher.

NZD

The AUD/NZD also capping off the session with some positive gains for the day, sitting at 1.0376 right now. Yesterdays Preliminary ANZ Business Outlook Survey results for November saw business confidence fall, with costs for business continuing to go through the roof. The net percentage of firms experiencing higher costs has now hit a stratospheric 89%, up from 87.2% in October. 12-month-out inflation expectations soared to 4.33% following the recent release of actual inflation figures showing a 4.9% annual rate.