- The Australian dollar is under pressure, weighed down by sharply lower commodity prices and further losses in stocks.
- European economic data has raised doubts over whether the slowdown in the September quarter was temporary in nature.
- Central bank speeches will dominate Monday’s trading session. Activity measures from Europe and the US will also be eyed by traders.
The Australian dollar fell on Friday as concerns about the global economy escalated, contributing to continued declines in stocks and commodity prices.
Here’s the scoreboard at 8am in Sydney on Monday.
AUD/USD 0.7230 , -0.0004 , -0.06%
AUD/JPY 81.61 , -0.02 , -0.02%
AUD/CNH 5.0211 , 0.0021 , 0.04%
AUD/EUR 0.6374 , 0.0003 , 0.05%
AUD/GBP 0.5636 , 0.0015 , 0.27%
AUD/NZD 1.0648 , -0.0013 , -0.12%
AUD/CAD 0.9576 , 0.0006 , 0.06%
After opening at .7252, the AUD/USD meandered its way through the Asian session before coming under pressures in European trade, undermined by weak flash European PMI reports for November, casting doubt over whether the slowdown seen in the September quarter was temporary in nature.
“Softer preliminary November PMI’s on Friday have confirmed that the current slowdown is more than just a temporary auto driven story,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.
“Activity grew at its weakest rate in nearly four years and worryingly leading sub-indices suggest the slowdown still has some legs.
“The Markit Eurozone report revealed a slower order book growth and falling exports were accompanied by deteriorating optimism about the outlook, as well as rising costs and prices.”
Despite concerns over the US economic outlook, leading to renewed doubts about the likely pace of monetary policy tightening from the US Fed next year, Catril said the PMI reports helped to lift the greenback against most major crosses, including the Aussie dollar.
“Despite concerns over the US housing sector, volatile equity markets, tighter financial conditions and a potential blink by the Fed, the US continues to win the least ugly contest with other major economies showing a greater degree of sensitivity to trade tensions and economic growth slowdown,” he said.
“The USD was the outperformer on Friday, erasing some of the losses incurred earlier in the week.”
With crude oil futures tumbling to fresh multi-year lows, and iron ore prices hitting multi-month lows, that ensured the Aussie remained under pressure, seeing the AUD/USD close at .7234, around the same level seen in early Asian trade on Monday.
Turning to the day ahead, there has been little reaction as yet to news that European lawmakers have signed up to a Brexit Withdrawal agreement with the UK, likely reflecting that the true test will be when the agreement is voted on by UK lawmakers in early December.
“The British pound has opened up early Monday Asian trade only marginally higher at 1.2840 after the weekend’s EU Summit on Brexit resulted in a unanimous decision by all 27 EU members to endorse the Brexit Withdrawal Agreement,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.
“The next step is for the Withdrawal Agreement to be voted on in the UK Parliament’s House of Commons. European leaders warned that British politicians will not get a better deal if they reject the current Withdrawal Agreement because there is no ‘plan B’.”
The vote is scheduled to be held on December 11.
On the data docket, New Zealand retail sales for the September quarter is the only major release scheduled in Asia, an event that has the potential to generate short-term volatility in the Kiwi, especially against the Aussie dollar.
Domestically, RBA Governor Philip Lowe will speak on “A Journey Towards a Near Cashless Payments System’ at the Australian Payment Summit in Sydney from 9.15am AEDT. RBA Assistant Governor Christopher Kent will also discuss ‘Securitisation and the Housing Market” at the Australian Securitisation Forum Conference in Sydney from 2pm AEDT.
Given the two topics, Kent’s speech, on the surface, appears more likely to be of interest to markets.
Later in the day, data highlights include German business confidence, French producer prices and the Chicago Fed’s National Activity Index and Dallas Fed Business Index from the United States.
It will also be a busy session for central bank speak with Draghi, Praet, Nowotny and Coeure of the ECB all in action. Mark Carney of the Bank of England will also speak in the latter parts of the session.
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