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The AUD Gets Hit, with Stats Putting the EUR, USD and Loonie in Focus

Bob Mason
Soft inflation figures and weaker private sector PMI numbers out of China hit the Aussie Dollar, with a busy day ahead on the data front.

Earlier in the Day:

Economic data released through the Asian session was on the busier side this morning, with a mass of stats out from the region including building consent and business confidence numbers out of New Zealand, 3rd quarter inflation and private sector credit numbers out of Australia and industrial production figures out of Japan, with October private sector PMI numbers also released out of China this morning.

Outside of the numbers, the Bank of Japan monetary policy decision will be in focus later this morning, though no surprises are expected as the BoJ struggles to deliver inflation to drive a shift in policy

For the Kiwi Dollar,

September building consents disappointed, falling by 1.5% following a downwardly revised 6.8% increase in August and a 9.7% fall in July.

  • Year-on-year, building consents increased by 5.4%, with a record number of new townhouses, flats and units consented to be built, up 29% over the year.

The Kiwi Dollar moved from $0.65547 to $0.65536 upon release of the figures that came ahead of October business confidence numbers.

The ANZ business confidence saw a slight improvement, rising from -38.3 to -37.1, where a net 37.1% of survey respondents expected general business conditions to deteriorate over the next 12-months.

  • A net 3% of firms expect to reduce investment, rising by 6.
  • Employment intentions rose by 1 point to a net 0% of firms expecting to lift employment.
  • Profit expectations fell by 2 points to -15%, with the agriculture sector weighing heavily despite a weaker Kiwi Dollar, the sector down 23 points to 54% to become the weakest sector.
  • The services sector remains the least pessimistic on profit outlook at a net -4%.
  • A net 31% of businesses expect it to be tougher to get credit, up 2 points.
  • Firms’ pricing intentions rose by 2 points to +32%, its highest left since 2014, attributed to rising cost of wages, transport and imported goods.
  • Construction intentions fell, with residential construction down 19 points to +5% and commercial down 20 points to -24%.

The Kiwi Dollar moved from $0.65574 to $0.65582 upon release of the figures, before easing to 0.655% at the time of writing, down 0.05% for the session.

For the Japanese Yen, month-on-month, industrial production fell by 1.1%, according to prelim figures, which was worse than a forecasted 0.2% decline, following August’s 0.2% rise.

  • Industries that contributed to the decline included: 1. transport equipment, 2. general-purpose, production and business orientated machinery and 3. Iron and steel.
  • Industries that contributed to an increase included: 1. Chemicals (excl. drugs); 2. Fabricated metals; and 3. Petroleum and coal products.
  • Year on-year, industrial production fell by 2.9% according to prelim figures.

The Japanese Yen moved from ¥113.048 to ¥113.064, against the U.S Dollar, upon release of the figures that came ahead of the BoJ policy decision and press conference. At the time of writing, the Yen was down 0.14% to ¥113.29

For the Aussie Dollar,

Private sector credit rose by 0.4% in September, which was in line with forecasts, whilst slowing from a 0.5% rise in August.

On the inflation numbers, the annual rate of inflation eased from 2.1% to 1.9% in the 3rd quarter, which was in line with forecasts, while quarter-on-quarter, consumer price rose by 0.4%, which was at the same pace as in the 2nd quarter, while falling short of a forecasted uptick to 0.5%.

According to the ABS, contributing to the quarter-on-quarter 0.4% rise included:

  • Rising prices for international holiday travel and accommodation (+4.3%); tobacco (+1.8%), property rates and charges (+2.3%), automotive fuel (+1.4%) and fruit (+2.4%)

Partially offsetting the quarterly rise included:

  • Falling prices for child care (-11.8%) and telecommunications equipment and services (-1.5%), the slide in prices for child care coming off the introduction of child care subsidy in July.

The Aussie Dollar moved from $0.70993 to $0.70856 upon release of the figures.

Out of China, October private sector PMI numbers were released:

The October manufacturing PMI came in at 50.2, falling short of a forecasted 50.7, with activity slowing from September’s 50.8

Service sector activity also slowed in October, with the non-manufacturing PMI falling from 54.9 to 53.9, coming up short of a forecasted 54.9.

The Aussie Dollar moved from $0.70856 to $0.70757 upon release of the figures, the Aussie Dollar being hit by softer inflation figures and stagnation in China’s manufacturing sector.

The Day Ahead:

For the EUR, economic data due out of the Eurozone includes 3rd quarter GDP numbers out of Spain, prelim October inflation figures out of France, Italy and the Eurozone, with the Eurozone’s unemployment numbers also there to consider, focus being on GDP and inflation figures through the day, any uptick in the annual rate of inflation likely to provide minor support to the EUR following the weaker than expected 3rd quarter GDP numbers released on Tuesday.

Outside of the numbers, expect more on the geo-political front, the EUR on the back foot for now.

At the time of writing, the EUR was down 0.03% to $1.1342, with noise from Germany, Italy and today’s stats in focus through the day.

For the Pound, it’s another quiet day on the data front, leaving the Pound to struggle as the markets consider what lies ahead for the British economy in a post Brexit world, with the talk of a Norway trade agreement meeting resistance in the early part of the week and S&P issuing the prospects of a ratings downgrade in the event of a ‘no deal.’

At the time of writing, the Pound was down 0.02% to $1.2704

Across the Pond, stats are on the lighter side though likely to pack a punch, with October’s ADP nonfarm employment change, 3rd quarter employment cost numbers and October’s Chicago PMI scheduled for release.

While the markets will be looking for rising employment costs, a reasonable addition to nonfarm would be needed to avoid any build up in concerns over the U.S economic outlook, with talk of the FED being over optimistic now beginning to do its rounds ahead of the mid-terms.

Trade war chatter through the U.S session, which included Trump talking of a trade deal with China provided support for risk appetite through the U.S session, with a sell-off in U.S Treasury yields holding up the Dollar going into this morning’ session.

At the time of writing, the Dollar Spot Index was up 0.03% to 97.041, with today’s stats and the Oval Office the key drivers through the day.

For the Loonie, it’s a busier day than normal on the data front, with key stats including August GDP numbers and September’s RMPI numbers, the set of numbers the first since last week’s BoC policy decision and hawkish outlook on policy. We can expect the numbers to have a material impact, any weaker than expected figures to weigh on the Loonie and market sentiment towards the BoC’s outlook on interest rates.

The Loonie was down 0.08% to C$1.3121 against the U.S Dollar at the time of writing, with today’s stats the key driver through the day.

This article was originally posted on FX Empire