AUD Loses Ground Post US-China Meeting

AUD

The Australian Dollar opens flat against most currency pairs this morning, following the meeting between President Trump and President Xi. Consequently, the ASX 200 ended 0.5% lower, weighed down by a 4.2% drop in consumer discretionary stocks. Market stability reflected limited commentary from the meeting, before the AUD reached highs of 0.66 as Trump described the meeting as “amazing.” With no significant data in Australia scheduled for release today, market attention shifts fully to the upcoming key event: the RBA rate statement next Tuesday. Today we have Chinese Manufacturing PMI and Non-Manufacturing PMI to be released.

USD

The AUD/USD opened down at 0.6553 after a week of consistent gains driven by optimism over improving U.S.–China relations. The meeting between President Trump and President Xi was deemed successful, with both parties stepping back from threatened measures and reversing some recent tensions. Despite the positive developments on US-China relations, US equity markets closed lower. US Treasury yields steadied. The S&P 500 dropped 0.9%. Looking ahead to next week in the US calendar, Monday’s ISM Manufacturing PMI release, previously at 49.1, will serve as the next key indicator of US economic conditions. Progress in US-China trade negotiations have reduced some of the downside risks ahead.
 

EUR

AUD/EUR opens flat at 0.5664 following the ECB monetary policy announcement, which was in line with expectations as the Governing Council held the Deposit Rate steady at 2.15%. European stocks performed weaker, led by a 0.5% decline in the CAC and a flat DAC. The ECB maintained rates as expected and noted that the European economy has shown resilience despite a difficult global backdrop. President Lagarde reiterated the ECB’s view that underlying inflation pressures remain aligned with the 2% target, emphasizing that the ECB’s monetary policy stance remains appropriate. Markets will also be focused on today’s upcoming Q3 data with Eurozone CPI Flash Estimate y/y scheduled for release later tonight, with Macquarie Strategy suggesting risks are tilted to the upside versus expectations. Furthermore, President Lagarde’s recent comments appeared to steer market expectations away from a possible rate cut, signaling the ECB may be anticipating a stronger-than-expected inflation reading.

GBP

The AUD/GBP pair opened at 0.4981, unchanged from yesterday. With no significant local data releases from the UK, the upward movement was primarily influenced by the AUD’s performance, guided by developments in the US-China discussions. The UK Pound is under pressure after productivity forecasts were lowered, risking a £20 billion bigger fiscal gap before the November budget. This has raised chances of a Bank of England rate cut, with markets expecting it in December and some experts predicting it as soon as next week. The UK’s FTSE 100 remained flat.  The UK economic schedule stays quiet until next Thursday’s Bank of England (BoE) Monetary Policy Committee (MPC) meeting and accompanying statement.

NZD

The AUD/NZD pair opens slightly up at 1.145. Due to the absence of market-moving news from the RBNZ and a domestic focus on inflation stability, the pair continues to be influenced by the hawkish adjustment in the RBA’s outlook. Business confidence in New Zealand improved slightly following the RBNZ’s substantial rate cut, but from previously very high levels. The most notable lift in confidence was in the retail sector, one of the most likely beneficiaries of lower interest rates. The New Zealand economic calendar remains quiet until next Wednesday, when attention will turn to Q3 employment data, including the Employment Change QoQ previously at 0.1% and the Unemployment Rate.