Strong GDP Data Increases RBA Rate Hike Odds
AUD
The Aussie Dollar opens higher against the major currencies following some stronger than expected local economic data and a weakening labour market in the US. Yesterday, our GDP q/q showed an increase of +0.4% (beating expectations of +0.3%) with markets now predicting the chances of an RBA interest rate hike on September 29 being 70%. Asian equities closed down, with the ASX -1.0%, Shanghai Comp -1.0% and Nikkei -2.9%. Later today will see the release of our Goods Trade Balance which is currently forecasted at 1.52B from a previous 1.93B. Across Asia, the Chinese RatingDog Services PMI data will also be released, currently expected to show slight growth at 50.6 from a previous 50.4.
USD
The AUDUSD opens higher at 0.7167, strengthening from yesterday’s lows of 0.7121 after economic data in the US revealed the labour market weakened slightly, while the Greenback dipped on intervention speculation in FX markets linked to the Japanese Yen. U.S. equities rebounded overnight with the Dow Jones closing +.6%, the S&P 500 +.5%, and the Nasdaq +.4%. U.S. 10-year yields fell slightly to 4.79%, while Brent Crude rose 1% to $95.50 a barrel. Last night, ADP Non-Farm Employment Change showed a change of +38K (exp. +47K), continuing to highlight America’s struggling employment market. Tonight, Unemployment Claims and ISM Services PMI are due to release with markets expecting +205K and 54.2 respectively. Also, Fed Governor Christopher Waller is scheduled to make public remarks at Reuters ‘Next’ event. His comments will focus on inflation outlook, the US economy and the Fed’s policy response.
EUR
The AUDEUR opens higher at 0.6185, touching fresh 3.5-month highs this morning. European equities were down overnight, with the DAX -0.5% and CAC -0.3%. No major data out of the Eurozone yesterday and for the rest of the week, with the next data piece being the European Central Bank’s interest rate decision on September 10. Markets currently expect a 98% chance of an increase of 25 basis points to 2.65%.
GBP
The AUDGBP opens at 0.5314, reaching fresh 2-month highs this morning. UK equities closed in the red, with the FTSE down -0.3%. No major data yesterday out of England yesterday and tonight, with Bank of England Governor Bailey speaking on Friday night. Markets will watch his speech closely, as he is expected to speak on central banks’ efforts to control inflation and prevent financial crises. UK Final Services PMI out later tonight, currently forecasted to remain stagnant at 52.8.
NZD
The AUDNZD opens at 1.2247 as markets saw dovish tones in the RBNZ’s commentary yesterday following their Cash Rate decision. The RBNZ had their September interest rate decision yesterday, increasing interest rates by 25 basis points as expected – however markets had originally expected further rate increases later this year. The RBNZ instead mentioned they were adopted a reactive approach to further hikes and the NZD weakened as a result. No more major economic data out of New Zealand this week.