Outsized Tier-Two Data Sensitivity
AUD
The Aussie Dollar opens lower against most majors, weighed by a softer Trade Balance figure yesterday. Australia's Goods Trade Balance printed at 1.83B, far below 6.1B expectations and 6.6B previously. Last August's trade surplus was 5.4B. Through August, Australia's trade surplus has averaged about 4.2B this year compared with an average monthly surplus of almost 6B in the first eight months of 2024. Separately, household spending slowed 5.0% y/y in August, down from 5.3% in July, and is one of the considerations that make the Reserve Bank of Australia cautious about easing monetary policy further. The futures market does not have the next interest rate cut fully priced in until late Q1 2026. Asian equities finished green across the board, Nikkei +0.9%, Hang Seng +1.7%, and Shenzhen +0.5%. The ASX 200 finished +1.1% as healthcare and materials lifted it higher, +2% and +1.8% respectively. Commodities fared poorly with Gold, Silver and Iron Ore all down on the day. No key data until the Westpac Consumer Sentiment report on Tuesday morning.
USD
AUD/USD opens lower at 0.6593, falling 0.7% from 0.6624 highs to 0.6577 lows in the overnight session with the USD regaining ground as initial uncertainty subsided with the government closure remaining in place. With many major US data releases withheld due to the government shutdown. alternative measures (ADP and Challenger data) are set to have a longer-lasting impact on markets than usual. The ADP employment report drew more attention than usual, showing payrolls dropped -32k in September, prompting a 4bp dovish repricing in the December Fed funds future, with 47bps of easing now expected by year-end. Overnight, the ISM Manufacturing PMI printed at 49.1, with US factory activity shrinking for the seventh consecutive month, reflecting a pullback in orders and adding to evidence manufacturing is lacking traction. Wall St. inched higher with the Dow +0.2%, Nasdaq +0.4% and the S&P 500 +0.1%. Tonight's Non-Farm employment report is expected to be withheld. We will see the ISM Services PMI as well as various FOMC Members speaking.
EUR
AUD/EUR opens flat at 0.5626, trading a range of 0.5641 to 0.5619 overnight. The DAX and CAC gained 1.3% and 1.1% respectively. Eurozone inflation accelerated this week, with headline CPI hitting 2.2% while the Core metric stayed at 2.3% for the fifth consecutive month. Overnight, the Eurozone Unemployment Rate printed at 6.3%, above 6.22% last month. Tonight, European Central Bank President Lagarde is set to speak at the Klaas Knot Farewell Symposium, in Amsterdam.
GBP
AUD/GBP remains near the 6.5-month highs seen on Tuesday (0.4928), starting the day flat on yesterday at 0.4906. The FTSE fell -0.2%. A quiet week on the UK data front. Tonight, Bank of England Governor Bailey will also be speaking in Amsterdam.
NZD
AUD/NZD opens lower at 1.1336, falling 0.7% from Wednesday's 3-year highs of 1.1418. No Kiwi data ahead of ANZ Commodity Prices on Monday. Next Wednesday, the Reserve Bank of New Zealand is set to announce the Official Cash Rate decision. Markets are expecting a 25bps cut, taking the OCR to 2.75%. Markets are betting on two more cuts after October, although third-quarter CPI data hasn't been released yet.