Aussie Dollar Directionless as Oil Prices Surge

AUD

The Aussie Dollar opens a touch higher against the majors as investors balance escalating tensions in the Middle East with fresh inflation concerns from higher oil prices. Asian equities closed higher yesterday with the Nikkei +3.3%, Shenzhen +3.1% and the Hang Seng unchanged on the day. Locally the ASX 200 closed flat despite gains of +3.3% in the technology sector. Looking ahead,  Australian employment data releases tomorrow, and the consensus looks for employment growth to slow to 15K in June from 40.3K in May, with the unemployment rate holding at 4.4% and participation steady at 66.7%. A print near consensus keeps the August rate hike question open.

USD

AUDUSD opened flat at 0.6998 as rate hike risk in Australia and rate hike risk in the US cancel each other out, leaving the pair with no clear direction. A positive session on Wall St. saw the Nasdaq close +1.3%, the S&P 500 +.8%, and the Dow Jones +.7%. U.S.10-year yields rose 4bps to 4.63%, while Brent Crude rose 2.5% to $91.50 a barrel. Geopolitical tensions remain high as President Trump played down imminent de-escalation talks, while U.S. strikes against Iranian military sites continue. Surging oil prices triggered inflation fears, driving a sell-off in U.S. Treasuries and lifting yields. Key economic data arrives tomorrow, with U.S. Unemployment Claims, followed by Flash Manufacturing and Services PMIs on Friday.

EUR

AUDEUR opened marginally higher at 0.6139, up roughly 10 pips in quiet trading. European equities closed higher in late trade, with Germany's DAX rising +0.7% and France's CAC gaining +0.3%. However, the persistent Middle Eastern conflict and spike in crude prices are reviving European inflation anxieties ahead of central bank meetings. Market attention now shifts to tomorrow's European Central Bank Interest Rate Decision and President Christine Lagarde’s press conference, followed by Eurozone Flash PMIs on Friday.

GBP

AUDGBP opens in the green at 0.5232, following some mixed economic data released yesterday afternoon. The FTSE 100 closed up +0.6%. UK employment data showed the Unemployment Rate holding steady at 4.9%, with Jobless Claims printing at 6.7k (exp 29.4K). On the political front, new UK Prime Minister Andy Burnham appointed former Defence Minister John Healey as Chancellor of the Exchequer, helping gilt markets stabilise as investors look for front-loaded fiscal discipline. Major event risk arrives this afternoon with UK CPI year-on-year data expected to cool to 2.7% from 2.8%, with UK Retail Sales and Flash PMIs following on Friday.

NZD

AUDNZD opens higher at 1.2011 and reclaims the 1.2000 level against the Kiwi. Early this morning, the GDT Price Index printed at +1.5% from a previous -4.9%. Later today, Credit Card Spending y/y is set to release but will do little to move markets as global risk appetite and commodity moves remain the primary drivers for the pair in the near term.