Aussie Dollar Mixed Following Central Bank Meetings
AUD
The Australian Dollar showed a mixed performance to close out the week, gaining ground against a broadly weaker US Dollar but losing traction against the other major currencies following strikes on crucial energy infrastructure in the Middle East. Asian equites were weaker across the board yesterday, the Nikkei -3.4%, Hang Seng -2% and Shenzhen -1.6%. Locally the ASX 200 ended -1.65% as materials and technology sectors underperformed at -4.8% and -3% respectively. Australia's labour market delivered a stronger-than-expected employment result in February, with total employment rising by 48,900, well above the market consensus of 20,000. However, the unemployment rate edged higher, climbing from 4.1% to 4.3%, driven largely by a notable increase in the participation rate rather than a deterioration in underlying labour market conditions. For the Aussie, both upside and downside risks remain squarely focused on global tensions surrounding energy prices and their potential to impact economies worldwide. The trajectory of the war and developments over the weekend remain the dominant drivers for markets right now with no data for the Aussie expected until next Tuesday with Flash Manufacturing PMI & Flash Services PMI set for release.
USD
AUDUSD has pushed higher to 0.7092 today following reports of damaged Middle Eastern energy infrastructure after Iran threatened to broaden strikes across the Gulf. Wall St. pared some losses late in the session following headlines from Israeli PM Netanyahu that suggested the war will end sooner than anticipated. All three major equity indices were -.4% entering the final hour of trade. U.S. 10-year yields were slightly lower at 4.25%, while Brent Crude was trading at $107 a barrel. U.S. weekly jobless claims data was mixed with initial claims falling to 205k against expectations of 215k while continuing claims rose to 1.857 mio against forecasts of 1.8552 mio. Also released was the Philly Fed Business Outlook Survey for March, which printed at 18.1, up from 16.3 and above expectations of 8.0. Moving forward, the balance of upside and downside risks is heavily tethered to international tensions over energy costs and their broader global economic fallout.
EUR
AUD/EUR is trading fractionally lower this morning at 0.6115 following the European Central Bank holding interest rates steady, which was a move that was widely anticipated by the market. The ECB stressed that it is prepared to deploy all available tools to guide inflation back to its 2% target. They are maintaining a strict data-dependent, meeting-by-meeting stance, acknowledging that the Middle East conflict creates severe upside risks for inflation and downside risks for economic growth. European equities opened softer, with the DAX retreating -2.8% and the CAC falling -2.0%. Today will see Euro Current Account and Trade Balance data released with nothing major of note until next Tuesday with Flash Manufacturing and Services PMI to release.
GBP
AUDGBP has softened to 0.5273 after The Bank of England voted unanimously (9-0) to hold its key interest rate at 3.75%. Notably, recognised policy doves changed their stance to support a hold due to intense uncertainty regarding inflation and the Middle East conflict, with the central bank explicitly warning that the war will deliver a severe shock to the economy. UK 10-year Gilts jumped to 4.82%, and the FTSE index shed -2.3%. Looking at economic data, the UK Unemployment Rate held firm at 5.2% in January, outperforming forecasts of a rise to 5.3%.
NZD
AUD/NZD has ticked lower to 1.2064 this morning. The New Zealand Dollar managed to claw back some ground against the Aussie overnight, successfully navigating a complicated global landscape where risk-sensitive assets are under intense pressure from geopolitical conflicts and wild swings in global energy markets. This morning the NZ Trade Balance was released coming in at -257M, beating expectations of -740M.