Greenback Gains as U.S. Producer Prices Surge

AUD

The AUD opens lower against the majors after some soft local employment data yesterday. Australia’s Unemployment Rate decreased slightly in July to 4.2%, down from 4.3% in June. This was driven by an increase of nearly 25,000 employed people, with a notable rise of 60,000 in full-time jobs. A key highlight of the report was that female workforce participation reached a new record high, as the number of women in full-time jobs grew by 40,000. The overall participation rate, which measures the proportion of people working or actively seeking work, remained stable at 67%. This data is in line with the Reserve Bank of Australia's (RBA) forecast that the unemployment rate would be 4.3% by December of this year. Asian equities finished on the back foot yesterday with the Nikkei trading -1.5%, Hang Seng -0.4% and Shenzhen -0.1%. The ASX 200 climbed +0.5%, as the utilities and financials sectors lead the pack at +3.5% and +1.3%. Commodities were mixed with the biggest movers being Oil +2.2%. and Gas -2.1%. Today, we are set to see Chinese Industrial Production Y/Y and Retails Sales Y/Y which are both expected to contract slightly, out at midday.
 

USD

The AUD/USD opens down by 0.8% at 0.6497, with the USD making gains after U.S. PPI data printed much higher than expected overnight. The Producer Price Index (PPI), saw a significant increase of 0.9% for the month. This jump was much higher than the estimate of 0.2% and represents the largest monthly gain since June 2022. Market expectations for a September interest rate cut by the Federal Reserve have shifted slightly after the latest economic data. Previously, the market was almost certain a cut would happen, following a Consumer Price Index (CPI) report that met expectations. However, after the recent release of the PPI, the likelihood of a September cut, while still high, decreased slightly. Furthermore, traders have significantly lowered their expectations for the Fed to implement three rate cuts this year. We also had Unemployment Claims, however, they came out on expectations of 224K. A choppy session on Wall St. saw a sharp fall in equities following strong U.S. PPI before all three major indices pared their losses to close unchanged on the day. Tonight we have Retail Sales which is expected to print in line with previous readings of 0.6%. Given the situation the Fed find themselves in, unexpected data readings are expected to have a more meaningful impact on currencies.
 

EUR

The AUD/EUR opens down at 0.5576 after some lower tier Eurozone data came out weaker than expected. Flash Employment Change q/q came out at 0.1% which was marginally below expectations as well as Industrial Production printing at -1.3% which was below expectations as well. European equities were up with the CAC and DAX up 0.8%. Next week we are set for a flurry of lower tier data until PMIs are released later net week. The focus will be on the manufacturing and services sectors of France and Germany, which are widely considered the primary economic drivers of the Eurozone.
 

GBP

The AUD/GBP opens down by about 15 basis points and just holding onto the 0.48 handle at 0.4802. Yesterday we had GDP data out of the UK with figures revealing that the UK's economic growth decelerated to 0.3% in the second quarter of this year, a slowdown from the first quarter but still surpassing initial expectations. This growth was primarily fueled by robust performances in the services and construction sectors, which expanded by 0.4% and 1.2% respectively. However, this was partially offset by a 0.3% contraction in the production sector. In response, Chancellor Reeves acknowledged the positive nature of the figures but stressed that further work is necessary to sustain this momentum. Meanwhile, Shadow Chancellor Stride criticized the current administration's economic policies, asserting that they are jeopardizing future prosperity to cover for past failures. The FTSE closed up slightly u at 0.1%. The next key piece of data out of the UK would be CPI Y/Y out on Wednesday and previously at 3.6%.
 

NZD

The AUD/NZD opens slightly up 1.0976. In terms of data out this morning, New Zealand's manufacturing sector showed a significant improvement, with the BusinessNZ Manufacturing Index rising to 52.8 from 49.2, indicating a return to expansion. The Food Price Index (FPI) gained 0.7%, following a 1.2% month-on-month previously. Additionally, Visitor Arrivals m/m to the country saw a continued decline, dropping by 2.5% compared to a previous decrease of 0.5%.