Aussie Dollar Cools After US Inflation Data
AUD
The Australian Dollar saw a slight pullback over the weekend, though it remains resiliently above the 0.70 handle. The support remains for the Aussie, as global investors pivot toward hard assets and commodities in response to rising sovereign debt concerns in the US and Europe. Asian equities ended Friday lower, led by the Hang Seng -1.7%, with the Nikkei and SHCOMP -1.2%. The ASX too closed lower, -1.4% with IT and healthcare taking the brunt of the fall. Lunar New Year celebrations across Asia this week will see various closures of their local markets. Looking ahead to Aussie economic data this week, we have the Unemployment Rate on Thursday. If it comes in on the stronger side, markets could grow more confident in the prospect of near-term rate hikes from the RBA
USD
AUD/USD opened down at 0.7058 over the weekend. U.S. Equities opened lower with the Dow Jones and S&P 500 both -0.5%, whilst the Nasdaq was -0.7, although these losses were quickly erased in the opening 15 minutes. The slightly delayed January CPI report landed on the right side of market expectations, helping to extend a rally in Treasury markets by putting Fed rate cuts more firmly on the table this year. Helped by cheaper gasoline and a rare dip in electricity costs, consumer prices rose a less-than-expected 0.2% in the month. US markets are closed today for Presidents’ Day Later this week, the focus shifts to the FOMC Meeting Minutes and Weekly Unemployment Claims. Markets are searching for any hint of when the Fed might finally blink on interest rates.
EUR
The AUDEUR softened since Friday, knocking on the door of the 0.59 handle over the weekend, opening this morning at a rate of 0.5947. European equities had a mixed close to the week, with the DAX up 0.3% and CAC closed down 0.3%. ECB President Lagarde spoke over the weekend, talking about her preference for investment incentives over taxes to keep capital in Europe, which suggests a focus on bolstering economic growth. This could provide the central bank more leeway to maintain or adjust interest rates based on domestic strength rather than purely defensive capital flight. Tonight Industrial Production m/m is set to be released, expected to drop to -1.5% from 0.7%, with markets waiting for the end of this weeks release of all the PMI’s.
GBP
AUDGBP opens in the red at 0.5179. Looking to UK equities, the FTSE closed up at +0.4%. Looking at the week ahead for the sterling, tomorrow we have Claimant Count Change (forecasted at 22.8K) and Average Earnings Index 3m/y (forecasted at 4.6%). Wednesday will have CPI y/y and Friday will see Retail Sales m/m, Flash Manufacturing PMI and Flash Services PMI.
NZD
AUDNZD opens down this morning at 1.1706. Earlier this morning the BusinessNZ Services Index printed at 50.9 which shows the sector remains in expansion territory, although momentum has slowed since last month. Looking ahead, The Reserve Bank of New Zealand meets on Wednesday and is considered certain to hold at 2.25%.