Dovish RBNZ Shoots AUD/NZD to 23-Week Highs
AUD
Souring risk sentiment sees the Aussie Dollar weaken against most majors, touching 19-week lows against the Euro and 7-week lows against the Pound. Asian equities finished the day mixed, with the Shenzhen trading +1.1%, Hang Seng +0.2% and the Nikkei -1.5%. Yesterday, China left the 1-Y and 5-Y Loan Prime Rates unchanged at 3.0% and 3.5%, as expected, with Beijing seen resorting to more fiscal measures to boost growth, instead of further loosening monetary policy. From Australia this morning, the Flash Manufacturing and Services PMIs printed at 52.9 and 55.1 respectively. The expansion in business activity growth was supported by higher new work inflows, including a renewed expansion in exports. No Major Aussie data ahead of CPI, next Wednesday.
USD
AUD/USD opens at 0.6432, falling approximately 0.3% over the past 24h, with the AUD weakening on souring risk sentiment, plus the USD strengthening following hawkish FOMC Meeting Minutes overnight. A mixed session for U.S. equities saw the Nasdaq close -.7%, the S&P 500 -.3%, and the Dow Jones +.1%. The Minutes indicated only 2 voting Members opted to cut rates at the last meeting, with the vast majority preferring to continue holding. Since the last meeting and 'dovish' FOMC Statement in late July, we've seen softer jobs data, hot inflation prints and mixed retail sales figures. Now, everyone is anticipating Friday's speech by Fed Chair Powell as the Jackson Hole Symposium (an annual economic symposium, attended by central bankers, finance ministers and market participants from around the world). Before then. we'll see Flash Manufacturing and Services PMIs, this evening. The Philly Fed Manufacturing Index and weekly Unemployment Claims are also set for release.
EUR
AUD/EUR touched 19-week lows of 0.5509 overnight, falling over 1.75% from last Thursday, kicking off today at 0.5522. The DAX and CAC fell -0.6% and -0.1% respectively. European Central Bank President Lagarde spoke yesterday afternoon, noting recent trade deals have alleviated, but certainly not eliminated, global uncertainty. She also indicated the slowdown in Euro area growth was already evident in Q2. Tonight, Flash Manufacturing & Services PMIs. Further expansion is expected in the services sectors. Further contraction is expected in the manufacturing sectors.
GBP
AUD/GBP bottomed out at 7-week lows of 0.4761 overnight before retracing a tad to kick off the day at 0.4779, being flat on yesterday morning. The movement came after a slightly stronger-than-expected CPI print from the UK (3.8% y/y, previously 3.7%). Services inflation - the bit usually most relevant for the Bank of England - rose to 5% from 4.7%. That was enough to drive core inflation up slightly too. The FTSE gained +1.1%. Tonight, Flash Manufacturing & Services PMIs. Tomorrow, Retail Sales, expected +0.4% m/m, previously +0.9% m/m.
NZD
A surprisingly dovish Reserve Bank of New Zealand saw the Kiwi Dollar slump yesterday, shooting the AUD/NZD pair to 23-week highs of 1.1068, kicking off today at 1.1044. While the RBNZ reduced its cash rate by a quarter point to 3.0%, as expected, the Board had surprisingly considered a 50bps cut and indicated further cuts are to come. The market did not expect the central bank to send a strong dovish signal that it intends to deliver further interest rate cuts. RBNZ Governor Hawkesby noted the rate is projected to bottom out at 2.5% and that the case for a 50bps cut was based on businesses and consumers being overly cautious, requiring a substantial boost to confidence and activity. Today, we'll see the NZ Trade Balance and Kiwi Credit Card Spending y/y. Next Monday, quarterly Retail Sales.