Risk-On Environment Further Weakens USD
AUD
The Aussie Dollar opens higher this morning, benefiting from a weaker US Dollar following the cooling US inflation data over the weekend. This "risk-on" sentiment is allowing the AUD to outperform most major crosses. Asian equities opened slightly mixed this morning. The ASX is currently +0.1%, while the Shanghai Comp is flat at 0.0%, and the Nikkei is trading down -0.2%. Data-wise, it will be a relatively quiet start to the week for Australia, with no high-impact economic releases expected today or tomorrow. Commodities were up with Natural Gas +1.3% and Copper +1.5%. However, investors must prepare for the RBA Interest Rate Decision tomorrow afternoon. While a hold at 3.60% is widely expected, any surprise in the rate or shift in the RBA’s forward guidance will trigger significant volatility for the AUD.
USD
The AUD/USD opens significantly higher this morning, hitting 0.6638. This is a three-month high. The pair moved up as the US Dollar continues to slump following the release of key US economic data over the weekend. On Saturday morning, the market received the Core PCE Price Index m/m, which came in flat at 0.2%. This met the forecast but reinforced the view that US inflation is cooling. This cooler inflation outlook strengthens market expectations for a rate cut from the US Federal Reserve at its upcoming meeting, pushing the US Dollar lower and risk assets higher. Wall Street saw a steady end to the week, with the Nasdaq closing +0.3%, the S&P 500 closing +0.2%, and the Dow Jones closing +0.2%. The focus this week will be entirely on the upcoming Fed decision. Looking ahead, markets are prepared for potential volatility on Wednesday with the key JOLTS Job Openings data.
EUR
The AUD/EUR opens at 0.5703, reaching a seven-month high on the back of broad AUD strength. The movement is largely driven by the AUD's recent growth story combined with the ongoing risk-on mood in the markets. European equity movements were slightly mixed to end the week. The Dax closed up 0.6%, while the CAC closed slightly lower at -0.1%. Out of Europe today, German Industrial Production m/m data is due for release, which is expected to show a minor increase of 0.2%. Later in the week, investors will be watching German Trade Balance and speeches from ECB President Christine Lagarde for any new directional cues.
GBP
The AUD/GBP opens around 0.4979 this morning, trading sideways between 0.4971 and 0.4988 overnight. The pair is showing consolidation after a recent run-up in the AUD. The FTSE closed marginally higher to end the previous week. The English economy has had a quiet start to December, and this will continue until tomorrow morning with the release of the latest UK services PMI data. Major focus for the Pound will be later in the week ahead of the Bank of England’s Monetary Policy Report Hearings as well as their GDP m/m out on Friday.
NZD
The AUD/NZD opens at 1.1490, showing slight resistance after trading between 1.1469 and 1.1511 in the last 24 hours. The cross is sensitive to the ongoing narrative of the NZ economy struggling overall, which keeps the pair elevated despite the AUD's focus on global factors. There is no major economic data expected to be released out of New Zealand today or for the remainder of the week.