Aussie Dollar Slides as Fed Strikes Hawkish Tone

AUD

The Aussie Dollar sees a mixed opening against the majors, after the FOMC unanimously raised US rates by 25bps. Asian equities finished stronger yesterday with the Shenzhen and Nikkei both at +.7% and the Hang Seng +.2%. Locally the ASX 200 climbed +.3% as energy and materials sectors led the pack at +2.2% and +1.3% respectively. Yesterday saw our MI Leading Index m/m come out unchanged at 0.0%. There is no further data out today, with eyes on RBA Gov Bullock's speech on Friday, which is the only Australian event on the calendar before the September 29 rate decision. Markets are currently pricing a 25-basis-point rate rise to 4.6% as an 84% likelihood.

USD

AUDUSD opens the day lower, with the Fed’s hiking projection pulling the pair below the 0.71 barrier, opening this morning at a rate of 0.7091. The FOMC unanimously raised US rates by 25bps and penciled in an additional hike later this year, driving US stocks to their lowest levels since July, with the Dow -1.2%, S&P 500 -0.4% whilst the Nasdaq closed flat. Fed Chair Warsh was notably hawkish in the press conference, noting the strength of the US economy and persistent inflation amidst high energy prices and geopolitical influences. The updated dot plot shows that 16 of 18 Fed officials expect at least one more rate hike this year Investors will spend the coming sessions assessing the FOMC hike and associated hawkish comments from Chairman Warsh ahead of US Housing Starts and Building Permits data for August which will be announced tonight. Housing starts are expected to rebound after declining in July, while building permits are forecast to moderate slightly. 

EUR

AUDEUR opens the day flat at a rate of 0.6181. European equities saw soft gains, with the DAX up +0.5% and the CAC up +0.6%. Yesterday, Industrial Production m/m released unchanged at -0.1%, expected at -0.2%. Looking ahead, Final Core CPI y/y and Final CPI y/y are set to be released tonight, expected to remain at 2.4% and 3.3% respectively. 

GBP

The AUDGBP opens the day flat, with the pair hovering around the 0.53 barrier, opening this morning at a rate of 0.5296. British equities were soft into the close, with the FTSE finishing up +0.3%. In the UK, August CPI printed broadly in line with market expectations, Core CPI rose 2.6% (Est. +2.6%) and Consumer Prices printed 3.1% (Est +3.1%). Tonight, will see their Rate Decision, currently expected to remain at 3.75%, with 3-0-6 hike to hold ratio. Markets are pricing in a 30% chance of a hike, with a ~85% chance before the end of the year, with poor economic factors keeping an anchor on the BOE from any further hiking action.

NZD

The AUDNZD opens flat at 1.2385 despite strong economic data out earlier this morning. NZ GDP q/q released at 0.2%, beating expectations of 0.1%. No more major economic data out of NZ for the rest of the month, with a majority of volatility arising from the AUD.