Hawkish Fed Extends USD Gains
AUD
The Aussie Dollar opens lower across the board as global risk sentiment continues to sour and demand for risk-on currencies (such as the AUD) weakens. Yesterday we had Chinese figures released to show a lopsided recovery in their economy, with GDP q/y beating expectations by 0.5% to sit at +5.3%, offering some confidence in the face of weakness in their property sector. Chinese internal demand remained frail, with Industrial Production y/y missing expectations by 1.5% to land at +4.5%. Retail Sales printed at +3.1% y/y (exp. 5.1%), indicating Chinese consumers' confidence and their willingness to spend could be gradually growing, despite ongoing concerns in the property sector. Local and Asian equities all had a red day, with ASX down -1.8%, Shanghai Comp down -1.6% and Nikkei also down -1.9%. Commodities saw Crude Oil -0.2%, Natural Gas +6.9%, Gold -0.6%, Silver -1.0% and Iron Ore +1.5%. Looking forward, no major data coming out locally or in China today, however, eyes will be on local employment data at 11:30am tomorrow, where our Unemployment Rate is expected to increase slightly to 3.9%, and Employment Change expected at 7.2K.
USD
AUDUSD opens lower at 0.6408 as investors flock to the USD amidst ongoing geopolitical concerns, with Fed Chair Powell adding hawkish commentary overnight too. Powell cautioned that sticky inflation would likely delay any interest rate cuts until later this year, stating that “Recent data have clearly not given us greater confidence” on inflation being fully under control, whilst stating “it’s likely to take longer than expected to achieve that confidence”. FOMC Member Barkin also stated “CPI data has not been supportive of a soft landing”, to reinforce Powell’s comments. US Equities had a steady day with S&P -0.2%, NASDAQ -0.1% and Dow Jones +0.2%. Onward looking we have FOMC Member Mester speaking before an audience at 7:30am tomorrow, where audience questions are expected, and Unemployment figures out late tomorrow evening.
EUR
AUDEUR opens lower at 0.6032 with little data coming out of the Eurozone overnight, continuing its downtrend to lows of 0.6020 before retracing some of it back. The Italian Trade Balance beat expectations of 3.44B to a strong print of 6.03B, although its impact was diminished with overall Eurozone Trade Balance missing expectations of 27.3B to print at 17.9B. Equities had a red day with DAX and CAC both losing -1.4%. Looking forward, we have Final CPI y/y and Final Core CPI y/y released tonight at 7pm, both expected in line with previous releases at +2.4% and +2.9% respectively.
GBP
AUDGBP opens slightly in the red at 0.5152 after some stronger employment figures out of the UK last night. Unemployment Rate increased from previous 3.9% to 4.2%, which also missed expectations of 4.0%, however its impact was lessened by stronger unemployment claims and rising wages. Claimant Count Change beat expectations of 17.2K to print at 10.9K, whilst Average Earnings Index 3m/y beat expectations by 0.1% to print at 5.6%. Bank of England Governor Bailey also added some slightly dovish comments, saying UK inflation was falling whilst questioning how much more evidence was needed before cutting rates. His exact statement was “In the UK we’re disinflating at what I call full employment. I see strong evidence now that the process is working its way through. Our judgment with interest rates is how much do we need to see now to be confident of the disinflation process”. UK Equities experienced a red day, with FTSE -1.8%. Looking forward we have CPI y/y printing at 4pm today, expected to decrease by 0.3% from previous to land at +3.1%. Inflation remains the Bank of England's key focus, with markets likely to react if today's print lands off-expectations.
NZD
AUDNZD opens in the red at 1.0874 with just the GDT Price Index coming in lower than previous at 0.1% overnight. The big news was their inflation data this morning with CPI q/q printing exactly on expectations of +0.6%, with little effect on the market. Looking forward, no major news from NZ for the rest of the week, with Trade Balance to look forward to next Wednesday.