Greenback Gains After US-EU Trade Pact
AUD
Little economic data sees the AUD open mixed against the majors. Asian equities finished yesterday mixed with the Hang Seng +0.7%, Shenzhen +0.2% and the Nikkei -1.1%. The ASX closed higher at +0.4%, led by the communications and financials sectors climbing +1.0% and +0.9%. Another quiet day for incoming data as we shift our focus to tomorrows CPI q/q, CPI y/y and Trimmed Mean CPI q/q data release. The 'trimmed mean', a core measure of inflation will be closely monitored. Expectations are for a steady rate q/q (0.7%), the case remains for a 25bp rate cut given the annual trimmed mean inflation continues to moderate. Markets are pricing more than 25bps of an August interest rate cut, but this pricing will be altered if tomorrow's inflation releases off-expectations.
USD
AUD/USD opens lower at 0.6522, trading in a 0.6513/0.6586 range, reaching lows on broad USD strength ahead of the European open. The US and EU reached a framework agreement which provides for an import tariff of 15% on EU goods, half the rate Trump had threatened from August 1. As the US tries to negotiate new deals with its trading partners, Donald Trump announced that the tariff for "the rest of the world" that has yet to reach an agreement will be in the 15 to 20 per cent range which would include Australia. A steady session on Wall St. saw the Nasdaq close +0.3%, the Dow Jones -0.1%, and the S&P 500 unchanged on the day. USD was stronger across the board which saw AUD/USD settle at the lower end of its 0.6513/.6586 range. Tonight will be a busy night for US data, with JOLTS Job Openings and Consumer Confidence set to be released. On Thursday, the US Fed has their rate decision looming as Powell is facing intensifying pressure to cut rates, alongside threats to his position from the Trump administration.
EUR
AUD/EUR opens up at 0.5625, still riding on the success of a trade deal agreement with the US. The trade deal is less damaging than threatened and reduces the uncertainty plaguing businesses and investors. European equities traded down at the open, CAC -0.4%, DAX -1.0%. This week's highlights include an initial look at Q2 GDP. The median forecast in Bloomberg's survey sees a stagnant quarter after 0.6% growth was recorded in Q1 .The other highlight is the preliminary estimate of July CPI.
GBP
AUD/GBP opened flat this morning at 0.4884, trading between 0.4857/0.4883 overnight. The FTSE closed -0.4% overnight. The CBI Realised Sales release last night showing consumer spending is down once again in the UK. The sales downturn has now stretched into a tenth consecutive month, underscoring the persistently challenging trading conditions facing the sector. Today we have the M4 Money Supply m/m, Mortgage Approvals and Net Lending to Individuals data release.
NZD
AUD/NZD opened flat at 1.0922. The pairing has been mostly stagnant as of late with little consequential data coming out of NZ recently. Tomorrow morning, ANZ will be announcing their monthly Business Confidence Report which is a leading indicator of economic health in New Zealand.