American Dollar Continues to Show Vulnerability
AUD
The Australian Dollar (AUD) opens slightly up against all majors this morning, attempting a modest reversal after significant overnight pressure driven by weaker-than-expected US manufacturing data, which has slightly improved global risk sentiment. The domestic ASX 200 index closed up 0.2%, benefiting from this stabilizing risk appetite, while the Asia-centric Shanghai Composite index closed down 0.4%, reflecting persistent regional liquidity and growth concerns. Domestic focus is entirely on this morning's crucial CPI y/y data release at 11:30 AM AEDT, which is widely expected to be the main volatility catalyst for the entire week ahead of tomorrow's GDP q/q data (Consensus: 0.6%, Previous: 0.7%).
USD
The AUD/USD rate opens slightly higher at 0.6565 this morning, with the upside largely driven by overnight US data easing expectations of aggressive Fed policy and sparking a minor risk-on environment. The equities market reflected this improved risk appetite, seeing the S&P 500 up 0.3% and the tech-heavy NASDAQ up 0.7%. The primary driver was yesterday's significantly weaker-than-expected ISM Manufacturing PMI, which printed at 48.2 (missing the 49.0 consensus), suggesting softening economic activity that could hasten a future Fed pivot, thus weakening the USD. Traders will now focus on tomorrow's key employment figures, including the ADP Non-Farm Employment Change (Consensus: 5K) and the influential ISM Services PMI (Consensus: 52.0, Previous: 52.4), alongside today's political focus on the Trump Cabinet meeting which comes under bipartisan scrutiny following the Sept. 2 boat strike.
EUR
The AUD/EUR cross is up, opening at 0.5646, recovering some ground as market focus shifts toward the Eurozone's persistent inflation concerns and policy outlook. Eurozone equities were mixed, showing cautious trading with the DAX up 0.5% and the CAC down 0.3%, indicating uneven sentiment across the region. The primary overnight driver was the inflation report, where the Core CPI Flash Estimate y/y held steady at 2.4% (matching the previous and consensus), and the CPI Flash Estimate y/y also held steady at 2.1% (matching consensus), confirming inflation remains sticky and above the ECB's target. With no major data releases today, focus shifts to tomorrow's speech by ECB President Lagarde, who may provide crucial forward guidance regarding potential rate path adjustments in the new year or comment on the surprisingly firm CPI data.
GBP
The AUD/GBP cross opens up higher at 0.4970, with the Pound under pressure after the Bank of England (BoE) signaled a loosening of bank capital rules designed to boost domestic lending, a move perceived as cautious by the market. The FTSE 100 did not move (0.0% change) overnight, failing to provide directional guidance for the Pound as investors digested the regulatory policy shift. The BoE announced it will cut high street bank capital requirements by one percentage point to about 13% by 2027, aiming to boost lending and economic growth but immediately raising market concerns about weakening protections against financial risk. With no major data releases today or tomorrow, the market focus will be digesting the long-term implications of this central bank decision and its impact on the UK's financial stability reputation, keeping the Pound volatile.
NZD
The AUD/NZD cross opens higher at 1.1440, despite the AUD's strong domestic focus, as the NZD lacks strong local drivers this morning. There were no major data releases overnight. New RBNZ Governor Anna Breman emphasised her commitment to a "laser focus" on the bank's core mandate of low, stable inflation, signaling that monetary policy will remain tight despite concerns over economic growth and fiscal policy.