Aussie Dollar Drops as US Yields Soar

AUD

The Aussie Dollar opens lower against the major currencies, due to a combination of a stronger US Dollar and disappointing activity data locally. Commodity prices increased overnight, with the largest movers being Oil +2.6%, Natural Gas +1.6% and Sugar +1.3%. Asian equities closed yesterday’s session mixed with the ASX +0.1%, Shanghai Comp -0.4% and Nikkei +1.4%. Yesterday saw the release of our Flash Manufacturing (49.3) and Services PMI (51.4), with the Manufacturing PMIs printing below 50.0 for the first time since March. The details of the report show a contraction in manufacturing activity and a slowdown in the services sector. Today will have Aussie employment data at 11:30am, with Employment Change expected at +21.5K and the Unemployment Rate expected to stay steady at 4.5%.The anticipated figures are a modest improvement from the discouraging data posted in July. No more data out of Australia for the rest of the week, and China will be observing a bank holiday tomorrow.

USD

AUDUSD opens in the red at 0.7040, dropping over 1% overnight as the USD strengthened from US Treasury yields soaring overnight and stronger than expected PMI data. Wall Street closed down, with the Dow Jones -0.7%, S&P500 -0.8% and Nasdaq -1.1%. The S&P Global Manufacturing PMI for the US came in at 57, up from 53.9, exceeding forecasts of 53.5. The services index rose from 56.5 to 58.7, above estimates of 56. FOMC Member Barr spoke yesterday at a fireside chat, mentioning that more rate hikes are needed to bring US inflation down. Tonight will have Unemployment Claims, expected to print at 201K. 

EUR

The AUDEUR opens at 0.6185, as the currency pair fell from 22-month highs of 0.6220. European equities saw a sell-off on the close, with the DAX -0.7% and CAC -0.4%. Last night had Flash Manufacturing and Services PMIs out of the Eurozone, which collectively beat expectations and printed above 50.0. This signals potential recovery in the European economy despite their surge in energy prices. No more European data to be released for the week.

GBP

The AUDGBP opens at 0.5317, dropping slightly overnight as markets devalued the AUD due to risk attitudes shifting. English Flash Manufacturing and Services PMIs released last night at 52.0 and 51.7 respectively, with the Flash Manufacturing beating expectations of 51.5. UK equities had a quiet trading session, with the FTSE closing flat. Tomorrow night, Bank of England Governor Bailey is due to speak at the Monetary Economics Conference in Oxford with markets hoping for clues on the BoE future governance. 

NZD

The AUDNZD opens slightly lower at 1.2402. No economic data released this week. The next release for New Zealand will be next Wednesday with ANZ Business Confidence.