Upbeat Chinese Growth Data Boosts Aussie Dollar

AUD

The Australian Dollar traded firmer across most major currency pairs over the past 24 hours, supported by a combination of stronger-than-expected economic data out of China and hawkish central bank commentary. Asian equities finished mixed yesterday with the Hang Seng +.5%, Shenzhen +.1% and the Nikkei -.6%. Locally, the ASX 200 closed +.4% as energy and financials sectors led gains of +2.2% and +.8% respectively. China’s third-quarter economic growth beat market expectations by expanding 4.5% year-on-year, Retail Sales came in at 1.1% y/y (Est. 0.5%) and Industrial Production was in line with market expectations of 5.5% y/y. Domestically, RBA Assistant Governor Christopher Kent signaled that policy transmission is working, but questioned whether financial conditions are restrictive enough, raising expectations of an extended pause or cautious stance at the next rate meeting. Looking ahead, domestic focus shifts to next Wednesday's Australian annual and monthly inflation releases, which will be critical in shaping the Reserve Bank's next policy decision.

USD

AUDUSD posted modest gains to open at 0.6980, holding its ground despite broad strength in the US Dollar Index. Wall St. rebounded to start the week with the Nasdaq closing +1.2%, the S&P 500 +.4%, and the Dow Jones unchanged on the day. U.S. 10-year yields rose 7bps to 5.14%, while Brent Crude fell slightly to $109.20 a barrel. High tech sentiment helped boost global risk appetite, balancing out reduced safe-haven demand in fixed income markets that sent US Treasury yields higher. After a quiet start to the week on the economic calendar, investors now look ahead to tonight's release of US Building Permits and Housing Starts for further signals on the health of the American economy.

EUR

AUDEUR opened higher at a rate of 0.6225 as European markets grapple with political and fiscal uncertainties. Government bond yields in France rose sharply amid domestic social unrest, while broader continental markets retreated, leading the French CAC 40 down -1.1% and the German DAX down -1.2%. The combination of political friction in Europe and steady policy messaging from Australian officials allowed the cross to trend higher. Market attention in the region now turns toward Friday's flood of European manufacturing and services purchasing managers' index data for a clearer gauge of economic activity.

GBP

AUDGBP strengthened overnight to open at 0.5246, benefiting from broader weakness across European assets that weighed on the Sterling. The UK’s FTSE 100 dropped -1.1% overnight as market participants weighed global fiscal concerns. The Australian Dollar's strength against the Pound was largely propelled by the spillover from European market anxiety alongside Australia's favorable regional news from China. Looking forward, the immediate catalyst for the pair will be tomorrow's UK annual inflation release, which is expected to print at 3.4% and will offer critical direction on the Bank of England's rate trajectory. In the interim, Average Earnings Index 3m/y, Claimant Count Change and the UK Unemployment Rate are set to release this afternoon.

NZD

AUDNZD edged slightly higher to open at 1.2330, outperforming its Trans-Tasman neighbor following a disappointing trade release out of Wellington. New Zealand reported a widening trade deficit for September as imports significantly outpaced exports, keeping the Kiwi under pressure despite the net-positive growth figures from China benefiting both currencies. Market participants are now focused on Thursday's quarterly New Zealand inflation report, expected at 0.8%, followed by next Wednesday's Reserve Bank of New Zealand policy statement, where consensus anticipates interest rates will remain on hold.