AUD Pops Higher as RBA Takes Hawkish Tack
AUD
The AUD opened stronger across the board, supported by the RBA’s decision to hold the cash rate yesterday. While the outcome was fully priced in, the move reinforced a sense of stability and confidence in the Aussie Dollar, helping it find renewed momentum. The AUD’s strength was mirrored by mixed moves in regional equities, with the ASX easing 0.2% while the Shanghai Composite gained 0.5%. The RBA decided to maintain the cash rate at 3.60%, citing a slowdown in the decline of underlying inflation and ongoing uncertainties in both domestic and global economic conditions. The RBA Statement noted that consumer demand and inflation were running a little higher than expected, while playing down signs of weakness in employment growth, encouraging market wagers that a near-term interest rate cut might be a close call. Looking ahead, there’s no major local data until Sunday when the OPEC-JMMC meetings will be in focus.
USD
The AUD/USD opened higher at 0.6614, supported by broad USD weakness amid growing concerns over a potential U.S. government shutdown. This uncertainty is adding volatility to the pair as markets weigh the economic impact. This cautious sentiment carried over into equities, with the S&P 500 rising 0.4% and the Nasdaq up 0.3% on the day. Overnight we saw JOLTS Job Openings coming in slightly above expectations at 7.23M, while markets await the ADP Non-Farm Employment Change, forecasted at 52K, making for a potentially influential day. The ISM Manufacturing PMI is also expected to be released 49.0 versus 48.7 previously.
EUR
AUD/EUR opened higher at 0.5635, as Preliminary German CPI m/m met forecasts, but the strength in the Aussie outweighed the data, pushing the pair upward. Equities in Europe saw modest gains, with the DAX up 0.6% and the CAC rising 0.2%. Today’s focus will be on the Eurozone’s inflation data, where the Core CPI Flash Estimate is expected at 2.3% year-on-year, while the headline CPI Flash Estimate is expected at 2.2% year-on-year. Tomorrow looks set to be a quiet day for the Euro, with no major data scheduled, but all eyes will turn to Friday when ECB President Lagarde speaks.
GBP
The AUD/GBP opened higher at 0.4919, supported by a stronger Aussie in the absence of any significant local economic data. This modest move reflects steady sentiment for the pair amid a quiet data calendar. In equities, the FTSE rose by 0.5% amid steady market conditions. This week is quiet for economic data, with all eyes on Bank of England Governor Andrew Bailey’s Friday speech, as his comments often give subtle clues on future monetary policy that can influence the pound’s value.
NZD
AUD/NZD opens at fresh 3-year highs of 1.1408, only 0.75% away from 12-year highs, supported by broad-based Aussie strength amid a lack of significant local data, leaving the pair to follow general market sentiment. With no major releases this week, the pair is likely to drift with broader risk flows, keeping traders focused on global developments for direction.