Fresh Aussie Inflation Data Due at 11.30am Today
AUD
The Aussie Dollar found some support and gained against all the majors barring the Pound Sterling overnight, and with a busy day ahead there could be more action on the cards. Asian equities were mixed on the close with the CSI300 -0.2% and Nikkei +1%. The ASX finished Tuesday’s session +0.3% led by Real estate and Communication stocks. The release of the Australian budget saw a forecast deficit of $36.9bn in 2022-23, shrinking from the $78bn predicted in the March budget. The budget also hinted that the risks associated with the Chinese economy are tilted heavily to the downside, and even forecasts Iron Ore prices will drop to $55/ton by the end of March. An important piece of data pencilled for release today is Australian Q3 Inflation at 11:30am. Markets are expecting headline CPI inflation to come in at +1.6% q/q (1.8% prev) and +7.1% y/y (6.1% prev). Given the RBA slowed the monthly pace of policy tightening in early October when lifting the cash rate by 25bps, it might take a hotter than expected print to convince the RBA to revert to 50bps increments.
USD
The AUD/USD reclaimed this week's early losses and fought back to trade at 0.6388 this morning as consumer confidence weakened in the US. A sizeable miss and weak detail in the October reading saw U.S 10-year yields fall 16bps to 4.09% while the NASDAQ closed +2.2%, the S&P 500 +1.6% and the Dow Jones +1.1%. US Consumer Confidence for October fell to 102.5, down from 107.8 and below expectations of 105.9. Also released was the Richmond Fed Manufacturing Activity Index for October which fell to -10, down from 0 and below expectations of -5. The data shows confidence levels are at three-month lows as widespread inflation and growing concerns about the economic outlook weighed on the Greenback. Tonight will see the release of Goods Trade Balance and New Home Sales inventories which will likely take a back seat to other US data released this week.
EUR
The AUD/EUR taking some marginal gains and reclaimed the 0.64 handle to trade at 0.6410 this morning. European markets pushed higher into the close with +1.9% gains at the closing bell for the CAC while the DAX was up +0.9%. German business confidence improved in October printing at 84.3 (83.5 expected). ZEW expectations also beat estimates of 75 coming in at 75.6, though both prints remained at depressed levels and still does not outweigh the overwhelming sentiment that recession remains inevitable. No major data set for release tonight as markets wait in anticipation for the headline event for the week, the ECB meeting on Thursday night, when the central bank is widely expected to hike rates by 75 basis points.
GBP
The AUD/GBP the only pair to trade in negative territory as some resemblance of stability returned to rescue the Pound, trading at 0.5566 this morning. The pound pared back yesterday’s gains this morning after the announcement of the new UK Prime Minister (PM) Rishi Sunak. Markets received the news in a positive light but this does not take away from the current economic turmoil the UK economy finds itself. MPC member Pill spoke and warned against slowing down rate hikes and said that moving away from the inflation target causes `problems'. No other data set for release from the Britts this week as politics remains on the forefront.
NZD
The AUD/NZD reversed its recent free-fall by picking up almost an entire cent from its low of 1.1022 to now trade at 1.1117. There was no macroeconomic data released that could be identified to correlate with the Aussie strength, perhaps the Australian Budget forecasting Chinese economy weakness in 2023 hurt the outlook for the Kiwis as well. Released at 11:30am this morning will be ANZ Business Confidence which came in at -36.7 in the last reading.