USD Falters Despite Bumper Inflation Read
AUD
The Aussie dollar has been trading with significant gains against the majority of its peers this morning as markets appear to be happy to take on a bit of risk. Illustrating this, the ASX rose 0.7% on Wednesday boosted by gains from energy, technology and healthcare stocks. Asian equities followed suit and all finished higher with the Hang Seng outperforming up 2.8%, reaching a one-month high. Commodities shared this momentum and Iron Ore & Copper closed up 0.6% & 3% respectively. With a lack of local news China filled the gap with annual CPI & PPI data. CPI & PPI printed at 1.5% & 10.3% respectively, both prints falling short of expectations but unable to take the shine of the AUD. Looking ahead there is no significant data to be released save the monthly trade balance figures coming out of China tomorrow. Focus is still on US data and the Fed's interest rate hike story.
USD
AUDUSD seeing nice gains overnight as risk sentiment improved, trading at monthly highs of 0.7284 this morning. The USD weakness was actually in contrast to strong CPI for December released overnight at 0.5% MoM, higher than expectations of 0.4% and matched expectations of 7.0% in YoY terms. Core measures printed at +0.6% MoM and +5.5% YoY with both higher than expected by 0.1%. The US monthly Federal Budget balance also increased the deficit $21.3B in January despite a modest expectation of 5.8B. However, despite the positive results, the US Dollar saw a significant sell off well into this morning. The selloff can be attributed to risk reversal, shown by US equities which were generally positive, the NASDAQ was up by 0.3% & the S&P 500 up by 0.2%. Recent events indicate that the Fed’s hawkish shift is clearly universal amongst Fed speakers so far. Looking ahead, the US will report its weekly Unemployment Claims & monthly PPI figures with the market expecting the index to halve its December figure of 0.8%. FOMC member Brainard is also set to speak tomorrow morning. Importers will be buying USD hand over fist today.
EUR
AUDEUR is slightly higher here this morning as well, currently trading at 0.6365. European equities saw generally favorable movement with the DAX & CAC closing up 0.4% & 0.7% respectively. European economic data was mixed with Germany’s Wholesale Price Index printing a lackluster 0.2%, a figure down 1% from Decembers release. Monthly Industrial Production figures were more positive and printed 2.3%. The ECB’s Villeroy outlined that the ECB will do whatever necessary to get inflation around 2% in the medium term and that Europe was very close to the peak of the inflation hump. There is a growing void between the optimism from the US Fed and what we're getting from the ECB which is sticking to its transitory inflation story. Looking ahead markets are looking to France to release its Budget Balance and monthly CPI figures tonight.
GBP
AUDGBP saw similar gains to AUDEUR reclaiming the 0.53 handle and is currently trading at 0.5313 this morning. There was no data of note yesterday and the FTSE closed up a modest 0.8% as risk got a boost. Looking ahead there is a slew of data coming out the UK which includes monthly GDP, monthly Industrial & Manufacturing Production amongst others.
NZD
AUDNZD posted minor gains here as well, currently trading at 1.06275. Markets are waiting for a new story to break AUDNZD out of what has been a pretty languid trading pattern.