Global Tariff Jostling Continues
AUD
A quiet FX session yesterday due to the local bank holiday, commodities finishing Monday mildly stronger and Asian equities firmer with reports of fresh Chinese stimulus having lifted global risk appetite. Yesterday's Melbourne Institute Inflation Gauge blipped higher with a 0.9% read for the month of July which doesn't fit with the RBA's deflation story, markets were happy to overlook the number. Recent softer Q2 inflation and signs of weaker economic growth have heightened expectations of Reserve Bank rate cuts. With inflation comfortably within the RBA’s 2–3% target band, markets now price in multiple easing moves over the coming months, keeping a cautiously bearish bias on the currency. Today's local data is limited to ANZ Job Advertisements.
USD
AUD opens flat against yesterday's open at 0.6473 in what was a quieter session in FX to start the week. Overnight US data showed Factory Orders in June slumped 4.8%, trimming much of May’s 8.3% rebound and underscoring a cooling U.S. economy. Interest-rate futures now assign a 98% probability of a Fed cut in September helping Wall St to a strong close with the Nasdaq trading +2%, the S&P 500 +1.5%, and the Dow Jones +1.4%. Trade-policy uncertainty has also receded despite President Trump’s announcement of “substantially” higher tariffs on Indian exports over its Russian-oil purchases, which India has decried as unjustified. ISM Services PMI is the main data point due tonight.
EUR
AUDEUR opens flat at 0.5588, with headlines that the EU would suspend trade countermeasures against the U.S. for 6 months, allowing EUR to regain yesterday's early losses. In Brussels, there was initial relief that President Trump backed away from the 30% car tariffs he had threatened; EU officials now expect formal confirmation this week of lower U.S. duties on autos and exemptions for industrial goods. Looking ahead, traders will turn their attention to tonight's flash euro-zone PMIs for fresh guidance on growth momentum.
GBP
The AUDGBP opens at 0.4868, barely changed on the day and only having traded a 20 bps range to start the week. Sentiment received a boost with rallies in UK bank and house-builder stocks, but the UK economic outlook hinges on Thursday’s BoE rate decision, for which futures markets are currently pricing 24.4 basis points worth of a rate cut. Today’s flash July PMIs for manufacturing and services will tide us over until then, probing whether UK activity justifies the majority-priced 25 bps cut.
NZD
The NZD comes in at 1.0940 which is flat on yesterday's open and holding near last week’s peak as the Kiwi reels from consecutive data misses. Tomorrow brings quarterly employment change and ANZ’s commodity price index, both closely watched for signals on labour market strength and export conditions. Beyond that, inflation expectations, which sat at 2.79% most recently will be crucial in shaping views on the RBNZ’s policy outlook. With no other major releases until next week, these reports are likely to set the tone for NZD trading in the near term.