AUD Trades Sideways as Fed Hawks Meet RBA Hikes
AUD
The Aussie Dollar opens flat against the majors this morning, holding steady as strong expectations for an RBA interest rate hike keep the Aussie resilient against a firm US dollar. Asian equities finished stronger yesterday with the Hang Seng +1.2% and Shenzhen +.7%, while the Nikkei was closed due to Japan’s Respect for the Aged Day public holiday. Locally the ASX 200 ended unchanged. Productive US-China trade talks provided a nice boost to overall market confidence. RBA Governor Michele Bullock will participate in a fireside chat today at 1:00 PM AEST in Sydney. Investors will look for fresh clues about next week’s decision and the possibility of further monetary tightening. The biggest domestic release arrives Thursday at 11:30 AM AEST with the Australian employment report, followed by the Trump-Xi summit overnight.
USD
AUD/USD is trading flat near 0.7118, caught in a balance between local RBA hike expectations and broad strength in the US dollar following the Fed’s recent rate increase. Market sentiment improved as crude oil prices pulled back from recent highs and encouraging early discussions took place between the US and China on trade and technology. Wall Street rallied strongly, led by a surge in tech stocks. The Nasdaq jumped +2.3%, the S&P 500 gained +1.5%, and the Dow Jones added +0.7%. FOMC Member Goolsbee spoke yesterday evening, noting that Fed projections are not enough if inflation is demand driven, expressing his concern over inflation in the US. Tomorrow, US manufacturing and services data (PMIs) are set for release with both forecasted to show a slight contraction. The headline event arrives Thursday when President Donald Trump meets Chinese President Xi Jinping in Washington.
EUR
AUD/EUR is virtually unchanged around 0.6210, keeping the pair tightly rangebound. Movements remain limited as both the RBA and the European Central Bank are currently in rate-hiking modes, keeping the two currencies closely balanced. European equities finished higher as lower energy costs lifted investor mood, with Germany’s DAX gaining +1.1% and France’s CAC rising +0.9%. Eurozone business activity figures (PMIs) are due on Wednesday, alongside scheduled commentary from several ECB officials.
GBP
AUD/GBP also remains flat at a rate of 0.5324. The Aussie holds a slight advantage over the British Pound as the Bank of England has paused its rate hikes, whereas the RBA is leaning toward another rate increase. The UK’s FTSE 100 gained +0.8%, catching a tailwind from falling oil prices and positive global trade news. UK economic activity data (PMIs) arrives on Wednesday, accompanied by remarks from Bank of England speakers.
NZD
AUD/NZD is holding steady at 1.2455 this morning. New Zealand has a quiet week for domestic news ahead so will be taking its cues from Wednesday’s global economic data and Thursday’s Trump-Xi summit.