Sluggish Wage Growth Holds Back Aussie Dollar
AUD
Aussie dollar bulls had little to be cheerful for as the local currency had a subdued day against the majority of its trading peers, with local Wage data providing little solace for the AUD. Asian equities were largely higher on yesterday’s close with the Nikkei taking gains of +0.9%, CSI300 the underperformer of the bunch, down 0.4%. The ASX was up +1.0% on Wednesdays close, helped by a +2.2% jump in iron ore, which saw material stocks advance 2.5%. With few updates coming out of the China, impetus was provided with the release of Australia’s Quarterly Wage Price Index which fell short of expectations, printing at 0.7% instead of an expected 0.8%. The Australian Bureau of Statistics said the annual rate of the wage price index was the highest since 2018, though still well behind the rate of inflation at 5.1 per cent. Looking ahead the April Labour force data will be released at 11:30am this morning and markets are expecting the rate to hold at 3.9%. No doubt this will be a key piece of data which will be on the agenda for both the RBA’s next meeting and the coming Federal Election.
USD
AUD/USD opening 60 basis points lower this morning at 0.6974 after failing to find traction at the 70c handle overnight. US Equities did not fare well with all Indexes closing in the red. The NASDAQ -4.7%, the S&P 500 down -4.2% and the Dow Jones -3.6%. The overnight losses in the NASDAQ and the S&P 500 were the largest single day falls since 11th June 2020. US 10-year yields also fell 10bps to 2.88% while oil slipped 3.2% to $108.80 a barrel. There were a few pieces of US data released yesterday including US Housing Starts for April which declined by 0.2% to 1.724m, worse than expectations of a 2.1% decline to 1.756m due to significant negative revisions. Looking ahead there is a plethora of US data which will include weekly Unemployment Figures, Monthly Existing Home Sales data & the Philadelphia Fed Manufacturing Index to round out the session.
EUR
AUD/EUR opens flat this morning at 0.6655 after a very subdued session, peaking at 0.6677 overnight. Like their trans-Atlantic counterparts’ European equities also suffered with the DAX & CAC closing down 1.3% & 1.2% respectively. European data was also limited yesterday with annual Eurozone CPI figures being the exception. The figure came in -0.1% lower than expectations, printing 7.4%. Annual Core CPI matched expectations at 3.5%. There was also plenty to talk about in world news with the Kremlin saying there is no movement in peace talks with Ukraine, with Kyiv showing a total lack of will to continue them. The ECB’s De Cos says rate hikes should be gradual amid uncertainty. We then heard from ECB’s Muller who said gradual means rate hikes of 25bp, and that it wouldn’t be a surprise for rates to pass zero in 2022. Tonight, has little in the way of data save the Eurozone Current Account for the month. The release of the ECB Monetary Policy Meeting Accounts will also follow however it is not expected to have a significant impact on markets.
GBP
AUDGBP opening a mere 15 pips higher this morning at 0.5644 after peaking at 0.5660 late yesterday. The UK had much more to talk about yesterday and was kicked off with annual CPI figures. UK inflation missed expectations of 9.1%, hitting 9% in April, a 40-year high, with petrol prices the highest on record. UK factories raised prices with PPI up 14% YoY in April (12.5% expected), the highest since mid-2008. UK input prices jumped 18.6% YoY in April, a record high. UK equities mirrored their European counterparts with the FTSE closing down 1.1%. It seems most of the data coming out of the UK for the week has already been shared as there is only the CBI Industrial Order Expectations report and GFK Consumer Confidence report to provide guidance to the pound. It is likely that the Employment figures coming out locally this morning will have a more tenable impact on the pair.
NZD
AUDNZD opening just slightly higher than yesterday’s open at 1.1057 this morning. Despite the relatively quiet overnight session the Kiwi has released encouraging Quarterly Input & Output PPI figures this morning. Production Outputs data doubled expectations at 2.6% and Inputs beat expectations, printing at 3.6%. Looking ahead The NZ Government will release its Budget today. Finance Minister Robertson has flagged that government spending will decline relative to GDP over coming years but the Budget will have a strong focus on spending on health. The Government is also considering new fiscal rules, for example, is aiming to run on average an operating surplus of 0-2% of GDP. Secondly, a net debt ceiling of 30% of GDP will be set. This will be the key piece of data today with the Kiwi releasing their monthly Trade Balance figures tomorrow morning to round out the week.