AUD Boosted by Pause in Middle-East Hostilities
AUD
The Australian Dollar gained ground against all majors over the weekend, underpinned by a broad recovery in risk appetite with a pause in strikes in the Middle-East. Asian equities finished in the red, with the ASX down -0.8% and the SHANGHAI COMP closing down -1.6%. There was no further data on Friday, with today being quiet as well. Looking ahead, domestic focus shifts to a high-impact week for the Australian Dollar, anchored by a scheduled speech from RBA Governor Bullock tomorrow, followed by crucial monthly CPI data on Wednesday. Markets expect headline inflation to remain elevated at 4.0% y/y, leaving traders closely monitoring both events for signals on the RBA’s upcoming interest rate trajectory. A hotter than expected reading could raise the odds of a rate hike for September's next meeting.
USD
The AUDUSD opens the week higher, with the pair flirting with the 0.70 barrier early this morning to open at a rate of 0.6990. Wallstreet was soft into the close, with the NASDAQ closing down -0.6%, DOW JONES up +0.5% and the S&P 500 remaining flat. The US and Iran have paused their strikes and counter-strikes over the Strait of Hormuz since Friday night, offering some hope of de-escalation and a return to negotiations. US Manufacturing PMI data for July printed at 53.8, down from 53.9 and below expectations of 54.4 and Services PMI printed at 53.6, up from 51.2 and better than expectations of 53.5. The combined results saw the composite PMI print at 53.6, up from 51.9 and above expectations of 52.2. Looking forward it is a quiet night ahead, with all eyes on Wednesday night’s data drop, with Core PCE Price Index q/q (the fed’s preferred method of tracking inflation) and their Federal Funds Rate.
EUR
The AUDEUR sees a bump into the open, with the pair slowly climbing over Friday, opening this morning at a rate of 0.6138. European equities were green into the close, with the DAX up +1.4% and the CAC up +0.9%. The latest flash PMI data presented a mixed picture for the Eurozone, as Germany’s manufacturing sector outperformed expectations at 52.2, contrasting with a softer French manufacturing print of 50.0. Although the upside surprise in German industry provides short-term support for the Euro, lingering contraction across services in both core economies highlights ongoing growth headwinds for the region. Looking ahead for the Eurozone, tonight will see German ifo business Climate which is looking to grow to 86.1 from 85.6. Friday’s CPI data will be the main highlight of the week.
GBP
The AUDGBP opens the day flat, with the pair keeping stable over the weekend, opening this morning at a rate of 0.5240. British equities were bullish into the close, with the FTSE finishing up +0.9%. UK economic data printed notably stronger than expected, led by a sharp rebound in month-on-month retail sales (1.0% vs -0.3% expected) alongside upside surprises in both manufacturing (52.8) and services (51.8) flash PMIs. This unexpected return to expansion across the private sector highlights underlying UK economic resilience, providing a firm fundamental tailwind for Sterling while tempering near-term growth concerns. Looking forward BOE has their rate decision Thursday night, with markets expecting it to remain at 3.75%, markets will be eyeing the following BOE Monetary Policy report and summary to see if they are hinting at hiking again later this year.
NZD
The AUDNZD opens the day flat, with the pair keeping undisturbed since Friday morning, opening this morning at a rate of 1.2064. It is baron on the data front for the Kiwi’s, with Thursday’s ANZ Business Confidence being the sole piece for the week.