Aussie Dollar Trades Cautiously Ahead of GDP Test
AUD
The Aussie dollar opens mixed against the majors, as it walks the tightrope of potential future interest rate hikes and a renewed skirmish between the US and Iran. Asian Equities finished up soft, with the ASX down 0.1% and the SHANGHAI COMP down 0.2%. Australia’s housing market continues to slow, with capital city house prices falling 1.1% in August. Meanwhile, building approvals dropped 3.6% in July, although that was after a strong June economists state. Australia’s Q2 GDP is due out later this morning and is expected to show growth of 0.3% q/q, another below-trend print following the soft Q1 result (0.3% q/q). In year-ended terms, this would see growth slow further to +1.9%. Looking through volatility related to data centre investment, private demand looks to have remained around trend growth, while public demand likely slowed (thinner pipeline of infrastructure projects). Given the recent high CPI print for July, the RBA will be carefully weighing up all data releases between now and its September 29 policy decision to gauge whether growth may be soft enough to ultimately bring inflation back to the 2.5% target.
USD
The AUDUSD sees a slide into the open, with the pair dropping below the 0.7150 level overnight, opening this morning at 0.7147. Wallstreet was red into the close from heighted risk, with the DOW JONES down -0.8%, S&P 500 down -0.7% and the NASDAQ down -1%. The ISM Manufacturing Purchasing Managers Index (PMI) fell to 54.6 in August from 55.6 in July, missing the market forecast of 55.2. The ISM Prices Paid Index held steady at 71.1, below expectations of 72.0, while JOLTS Job Openings rose to 7.271 million in July from 7.182 million, but fell short of the 7.3 million forecast. The Federal Reserve’s Beige Book, scheduled for release tonight, will provide an updated view of economic conditions and business sentiment across the US. The July report noted moderate increases in activity across eleven out of twelve districts, alongside a pickup in consumer spending driven by higher oil prices. Most respondents remained optimistic about economic growth, although several districts highlighted elevated uncertainty stemming from energy prices.
EUR
The AUDEUR opens the day flat, with the pair not seeing much action this 24 hours, opening this morning at a rate of 0.6164. European equities finished the day lower, with the DAX down -1.1% and the CAC down -0.4%. EU CPI for August printed at +0.4% MoM and +3.3% YoY as expected, though the core numbers were modestly lower than forecast, markets had little reaction to this. Tonight will see Spanish Employment Change, looking to slightly soften to 15.4k from 19.5k, with a slew of PMI’s out tomorrow.
GBP
The AUDGBP keeps steady, with the pair having an uneventful trading session yesterday, opening this morning at a rate of 0.5287. Final manufacturing PMI came out largely unchanged at 51.7, estimated to remain at 51.5. Today is quiet for news, with all eyes on this Friday’s Gov Bailey speech, which he will be talking about how the central bank is to control inflation.
NZD
The AUDNZD opens the day marginally higher, hitting a monthly high overnight, opening this morning at a rate of 1.2124. At midday the RBNZ is widely expected to lift the OCR further to 2.75% today. This largely reflects the view that the OCR is well below neutral at 2.5% while inflation pressures remain elevated. Economic growth appears to have rebounded since March, when the US-Iran conflict weighed on activity and sentiment.