AUD/NZD Sees 3-Year Highs on GDP Slump

AUD

The Aussie Dollar opens lower against most majors, easing from recent highs after the U.S. Federal Reserve cut its rates by 25bps, although projections of strong inflation prevented sharper bets of further monetary policy in the near future. A mixed day for Asian equities, Hang Seng +1.8%, Shenzhen +0.6% and Nikkei -0.3%. The ASX 200 retreated -0.7% as real estate and consumer discretionary lead losses at -1.5% and -1%. Australian labour force data for August will be released today. With recent labour market indicators remaining relatively steady, such as job ads and reported hiring, markets expect employment growth of around 21.2k m/m. The Unemployment Rate is also expected to remain unchanged at 4.2%. The Underemployment Rate will also provide a useful read on conditions
 

USD

AUD/USD traded a 1% range overnight, whipsawing from yearly highs of 0.6707 to 0.6641 lows with the USD strengthening in the aftermath of the Federal Reserve interest rate decision, opening at 0.6651. The Fed cut rates by 25bps to 4.25%, as expected, but the Greenback refrained from depreciating as projections of strong inflation prevented sharper bets of loosening by the FOMC. The USD found further support after Fed Chair Powell said the central bank is in a 'meeting-by-meeting situation' regarding the outlook for interest rates and characterised the move as a risk management cut, adding that he does not feel the need to move too quickly on rates. Choppy conditions followed the expected 25bp rate cut from the FOMC but ultimately saw the Dow Jones close +0.6%, the Nasdaq -0.3%, and the S&P 500 unchanged. Tonight, weekly Unemployment Claims and the Philly Fed Manufacturing Index. 
 

EUR

AUD/EUR a little lower at 0.5624, trading a 0.5% range over the past 24 hours. The DAX gained +0.1% and CAC fell -0.4%. Little in the way of meaningful Eurozone data ahead of Flash PMIs, next Tuesday evening.
 

GBP

AUD/GBP touched 1-week lows of 0.4873 overnight, kicking off today at 0.4880. The FTSE gained +0.1% yesterday. On Tuesday, we saw the UK labour market slowing further (higher unemployment claims), while yesterday we saw UK consumer inflation print on-expectations at 3.8% y/y, almost double the Bank of England's target. Tonight, the BoE is expected to hold interest rates at 4.0% given inflation remains elevated. While a faster pace of rate cuts would support economic growth and lower the Government's borrowing costs, the central bank will likely remain cautious in the next few months as it focuses on keeping inflation under control.
 

NZD

A New Zealand GDP slump has seen AUD/NZD soar to 3-year highs of 1.1216 this morning, currently sitting at 1.1210. New Zealand's Gross Domestic Product fell by -0.9% in the June quarter, a reduction far greater than market expectations of -0.3%. The decline was driven by manufacturing, down -3.5%, and construction, down -1.8%. The fall may put pressure on the RBNZ to be more aggressive with its cuts in the Official Cash Rate, which sits at 3.0%. The bank's next opportunity is October 8.