Market Briefing: Onwards & upwards
Have a look at the latest edition of our Event Radar & Views In A Nutshell pack.
Upbeat tone. Markets continue to factor in US Fed rate cuts. US bond yields fell further & USD weakened. AUD approaching top of its year-to-date range.
US jobs. Benchmark revisions to US payrolls due tonight. Negative revisions could keep USD on backfoot, a tailwind for other currencies.
Inflation pulse. US producer & consumer prices due later this week. More signs of tariff driven inflation may generate a burst of market volatility.
Global Trends
News wise it has been a quiet start to the week. The lack of fresh information has seen markets reinforce their US Fed interest rate cut views which were brought more to life by last Friday’s lackluster jobs report. US bond yields extended their slide with the policy expectations driven 2yr rate at the bottom end of its cyclical range (now ~3.49%) and the 10yr rate at a multi-month low (now ~4.04%). The downshift in US bond yields gave equities a helping hand with the S&P500 (+0.2%) within striking distance of its record highs. At the same time, in FX, the USD has remained on the backfoot. EUR (the major USD alternative) has risen (now ~$1.1746), while USD/JPY dipped (now ~147.48) though the political ructions in Japan following the weekend announcement that PM Ishiba was resigning also weighed on the JPY a little. Elsewhere, the backdrop of a weaker USD and buoyant risk sentiment boosted the NZD (now ~$0.5941) and AUD (now ~$0.6592) with the latter not that far from its year-to-date peak.
The US economic calendar heats up over the next few sessions. Tonight, attention will be on the benchmark revisions for US non-farm payrolls through to March 2025 (12am AEST). The revisions won’t have anything to say about recent momentum in the US labour market, though the pace of jobs growth between April-2024 and March-2025 does look set to be scaled back. In the current environment we think this type of outcome may exert some more downward pressure on the USD.
However, later in the week we see a risk that the US producer price (Weds night AEST) and consumer price (Thurs night AEST) data shows signs of greater pass-through to inflation from tariffs. If realised, we feel this might see markets trim their more aggressive near-term Fed easing assumptions. Markets are factoring in a ~11% chance the US Fed delivers a larger 50bp rate cut in mid-September. We think this is unlikely with a 25bp move the most likely course of action, in our opinion. An upward adjustment in US interest rate expectations could see the USD rebound later this week. That said, we don’t see this type of move lasting too long or extending too far. We believe slower US growth coupled with a steady stream of US Fed rate cuts should see the USD trend lower over the medium-term.
Global event radar: US Payrolls Revisions (Tonight), ECB (Thurs), US CPI (Thurs), China Data (15th Sep), US Retail Sales (16th Sep), BoC (17th Sep), US Fed (18th Sep), BoE (18th Sep), BoJ (19th Sep), Global PMIs (23rd Sep)
Trans-Tasman Zone
The mix of a weaker USD and upbeat risk appetite stemming from the pricing in of a series of US Fed interest rate cuts has supported the NZD and AUD at the start of the new week (see above). At ~$0.5941 the NZD is approaching its 100-day moving average, a technical trading indicator it hasn’t been above in about a month, while the AUD (now ~$0.6592) is closing in on its year-to-date high. The backdrop has also helped the AUD tick up on most of the major cross-rates. Outside of AUD/NZD which drifted back from the top of its multi-month range (now ~1.1097) the AUD strengthened by ~0.2-0.5% against the EUR, JPY, GBP, CAD, and CNH over the past 24hrs.
Data wise, Australian consumer (10:30am AEST) and business confidence (11:30am AEST) figures are due today. Based on history they shouldn’t cause much of an AUD reaction. Rather, the AUD’s short-term fortunes will be driven by swings in the USD and the upcoming US data releases. As mentioned above, tonight benchmark revisions to US non-farm payrolls are released (12am AEST). And we think negative revisions which reduce the pace of US jobs growth between April-2024 and March-2025 could see the USD remain heavy and this in turn might give the AUD more of a helping hand.
However, over the next few days we believe the US producer price (Weds night AEST) and consumer price (Thurs night AEST) inflation data could see the USD bounce back and this may take a bit of heat out of the AUD. In our view, the US PPI and CPI reports could show firmer inflation pressures due to the pass-through of tariffs. If realised, we feel this might see markets pare back their aggressive near-term US Fed easing bets. However we don’t feel rebounds in the USD/pull-backs in the AUD should be overly large. Over the medium-term (i.e. next ~3-12 months) we believe the AUD can continue to trend higher. We think the AUD should be supported by a mix of a weaker USD as US Fed interest rate cuts re-commence, ongoing cautious approach from the RBA, upturn in Australian economic activity, and/or signs of improvement in China’s economy as its stimulus push helps counteract tariff headwinds across its export sector.
AUD & NZD event radar: US Payrolls Revisions (Tonight), ECB (Thurs), US CPI (Thurs), China Data (15th Sep), US Retail Sales (16th Sep), BoC (17th Sep), US Fed (18th Sep), NZ GDP (18th Sep), BoE (18th Sep), BoJ (19th Sep), Global PMIs (23rd Sep), AU CPI (24th Sep), RBA (30th Sep)
AUD levels to watch (support / resistance): 0.6490, 0.6520 / 0.6620, 0.6680
NZD levels to watch (support / resistance): 0.5830, 0.5880 / 0.5960, 0.6010
Market Moves
Peter Dragicevich
Currency Strategist - APAC
Upcoming Events)
TUESDAY (9th September) NZD Manufacturing Activity (Q2) (8:45am) AUD Consumer Confidence (Sep) (10:30am) AUD Business Conditions (Aug) (11:30am) USD NFIB Small Bus. Index (Aug) (8pm)
WEDNESDAY (10th September) USD Payrolls Revisions (12am) GBP BoE’s Breeden Speaks (1:15am) CNY CPI/PPI Inflation (Aug) (11:30am) USD PPI Inflation (Aug) (10:30pm)
THURSDAY (11th September) EUR ECB Decision (10:15pm) USD CPI Inflation (Aug) (10:30pm) USD Initial Jobless Claims (10:30pm) EUR ECB Pres. Lagarde Speaks (10:45pm)
FRIDAY (12th September) NZD Card Spending (Aug) (8:45am) AUD RBA’s Jones Speaks (12pm) GBP GDP – Monthly (July) (4pm) EUR ECB’s Rehn Speaks (6pm) EUR ECB’s Nagel Speaks (6:15pm)
SATURDAY (13th September) USD Uni. of Michigan Sentiment (Sep P) (12am)
*Note, all times/dates provided are AEST
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