US-China Trade Friction Continues
AUD
The AUD opens mixed across the majors as risk sentiment softens amid renewed concerns of a potential trade war between the US and China. This developing situation has captured most of the market’s attention, with investors closely watching for any escalation that could impact global growth and commodity demand. Equities closed higher, with the ASX up 1% and the Shanghai Composite rising 1.2%, reflecting renewed investor optimism across the region. RBA Governor Michele Bullock spoke this morning, noting that monetary policy is now only “marginally tight” and nearing a neutral level, suggesting rate cuts could be on the horizon if conditions allow. However, she also highlighted that inflation, particularly in services and housing remains stubborn, meaning any easing will be data-dependent. Late this morning we have key labour market data out, with Employment Change expected at 20.5K and the Unemployment Rate forecast to edge slightly higher to 4.3% from 4.2%. No major data releases are scheduled for tomorrow.
USD
AUD/USD opens higher at 0.6513, recovering from the dip it took following China’s retaliation to Trump’s recent tariff comments. The pair has regained some ground as markets stabilise, though sentiment remains fragile with traders closely watching for further developments between the two economies. US equities gained modestly, with the S&P 500 rising 0.5% and the Nasdaq climbing 0.6%, supported by easing risk sentiment and renewed investor confidence. Yesterday’s Empire State Manufacturing Index showed a rebound to 10.7, recovering sharply from -1.8 last month and well above expectations of -8.7, indicating improving conditions in New York’s manufacturing sector. Today’s Philly Fed Manufacturing Index is forecasted at 8.6, and all eyes will be on tomorrow’s remarks from FOMC member Waller for further guidance on the Fed’s policy outlook.
EUR
AUD/EUR opens flat at 0.5591 after trading as low as 0.5584 early this morning. A quiet data day yesterday, with little in the way of domestic or European economic releases to drive significant movement. Equities were mixed in Europe, with the CAC rising 2% while the DAX edged down 0.2%, reflecting varied investor sentiment across the region. Later this evening we have Eurozone Trade Balance data to be released. Tomorrow ECB President Lagarde is set to speak early Friday morning and later in the evening we have Eurozone Final Core CPI y/y & Final CPI y/y.
GBP
The AUDGBP opens down at 0.4859 this morning due to poor British unemployment figures earlier this week. The FTSE was also up slightly at +0.1%. Looking ahead, we have GDP m/m expected at 0.1% tomorrow. The key development is that private sector wage growth, a persistent concern for the Bank regarding inflation, is finally showing signs of a more rapid decline. Pay growth among companies has fallen to 4.4% annually, down from 6% at the beginning of the year. Crucially, the three-month annualized rate is now at a much lower 2.4%, indicating a strong probability that the annual rate will drop below 4% by November. This decline is typically factored into the Bank of England's forecasts, and seeing this materialization of lower-than-expected wage pressure will help alleviate the Bank's concerns about the upside risks to inflation. For data today we have UK GDP m/m and Goods Trade Balance.
NZD
AUDNZD opens up at 1.1387. Today New Zealand will be releasing the FPI m/m. CPI q/q is to be released next week.