China Inflation Numbers Expected to be Strong Today
AUD
The AUD was slightly weaker against most major currency pairs overnight despite strong performance from commodity prices. Leading the charge was Iron Ore which was trading firmly to make +1.4% gains whilst copper is up +0.4%. US Equities were mixed and couldn’t help propel the AUD with the Nasdaq, S&P 500, and Dow Jones all trading either side of flat. The RBA’s Kent will speak at 9:30am today, but the content should focus only on Australia’s fixed income markets. It is unlikely that there will be any reference to the monetary policy outlook, and currency markets will probably have to wait until the Q&A for any hawkish insight. Chinese CPI and Producer Price Index (PPI) data for May will be the main event for today, coming out at 11:30 this morning. China PPI inflation should continue to surge and could hit the highest level since 2008. Forecasts suggest CPI jump from 0.9% to 1.6% whereas the PPI could also rise past 6.8% previous readouts to 8.5%.
USD
The AUDUSD lost some ground overnight to trade at 0.7736 at time of writing. Confusion over the US Fed’s next move, resulting from the mismatch of inflation expectations and recent strong US data, backed the rush to risk-safety, weighing on the AUD/USD due to its risk-barometer status. US Job vacancies hit a record high overnight, with JOLTS Job Openings massively exceeding consensus expectations by over 1 million, coming in at 9.29m compared to 8.18m expected. It’s a further sign that post-pandemic reopening is well underway, and that labour shortage (not labour demand) is the key growth constraint. The Fed’s stance on inflation will be tested yet again tomorrow with US CPI being released, and if it exceeds expectations like last month, it would likely provide a renewed bid for the USD.
EUR
The AUDEUR is just a touch lower than the levels we were seeing yesterday, sitting at 0.6355 this morning. The Eurozone ZEW Economic Sentiment (a survey of institutional investors and analysts which rates the relative 6-month economic outlook for the Eurozone) for June fell to 81.3 for the current month, compared to 84.0 in May, and above the 77.0 consensus forecast. Separately, The German ZEW headline numbers for June showed that the Economic Sentiment Index worsened unexpectedly to 79.8 from 84.4 previous while beating estimates of 86.0. The major attraction for the week here is the ECB Press Conference and Monetary Policy Statement being released late tomorrow night.
GBP
The AUDGBP was subdued overnight with little to move the pair, trading in tight ranges to sit at 0.5467 this morning. Doubts that the spread of the so-called Delta variant could disrupt the UK government’s reopening plans on June 21 acted as a headwind for the British pound, though the slight uptick was short-lived. There’s little data out of the UK for the remainder of the week with key focus on the aforementioned US CPI and ECB meeting.
NZD
The AUDNZD made some slight gains overnight to move to a rate of 1.0754 this morning. In the absence of significant macroeconomic data releases, the lack of clarity over the Fed’s action in the June meeting has meant the pair has remained subdued. This morning we’ll see the release of ANZ Business Confidence and ANZ Activity Outlook, however they are unlikely to whip up any price action on this front.