Aussie Dollar in Limbo as Ceasefire Deadline Approaches

AUD

The Aussie Dollar opens mostly flat against the majors this morning bar the USD, as optimism that a ceasefire deal in the Middle East will be reached despite renewed tensions between Washington and Tehran over the weekend. Asian equities ended stronger yesterday, with the Hang Seng trading +0.8%, the Nikkei and Shenzhen both +0.6% each. Locally the ASX 200 climbed +0.1% as consumer discretionary and consumer staples sectors outperformed at +1.5% and +1.4% respectively. The Australian economic calendar is light this week, so the Aussie's movements are likely to be dictated by headlines from the Middle East.
 

USD

AUDUSD opens in the green at 0.7177 as the softer US Dollar supports the Aussie. With the current two-week truce set to expire soon, markets are looking ahead to a potential second round of peace talks expected to take place in Pakistan. However, Iran has yet to publicly confirm its participation. On Wall St. the Nasdaq closed -.3%, the S&P 500 -.2%, and the Dow Jones unchanged on the day. Brent Crude rose 5.1% to $95 a barrel. US 10-year yields were unchanged at 4.25%. Later tonight, US Retail Sales m/m will be published, providing an update on the health of the American consumer. Headline sales are currently forecast to increase +1.4% m/m which is largely driven by higher fuel prices. Fed Chairman-Designate Warsh will be due to testify on his nomination as the Federal Reserve Chair later tonight. His comments will be closely monitored and will provide insights into his potential policy outlook.

EUR

AUDEUR comes in flat this morning at 0.6088 as the pair sits in limbo pre ceasefire expiration. Euro equities closed in the red, with the DAX and CAC coming in at -1.2% and -1.1% respectively. Early this morning ECB President Lagarde spoke at the Association of German Banks Annual Reception and noted that the European Central Bank would have to raise its key interest rate more than would otherwise be the case if governments are too generous with their support for households facing higher energy costs. Later today some minor economic survey data is set to release which is unlikely to move markets. 

GBP

AUDGBP opens slightly up at 0.5303 as it continues to trade sideways. The FTSE also fell slightly into the close, coming in at -0.5%. A big day on the economic calendar for the UK today with Claimant Count Change, Average Earnings Index 3m/y and the Unemployment Rate set for release. Average Earnings for the UK are currently forecasted to increase 3.6%, which would follow the trend of the wage growth slowing since February this year.

NZD

AUDNZD opened down this morning at 1.2145, following CPI inflation data released earlier this morning. CPI q/q showed a 0.9% increase (exp 0.8%) which puts the inflation rate above the RBNZ's target rate. This supports the case for continued policy tightening or at least a delayed easing cycle for the RBNZ.