Big Expectations for Today's Q1 Inflation Data
AUD
AUD has had a mixed last 24hours ahead of today's all important local inflation data for Q1. There was little in the way of data both locally or from China yesterday, nevertheless local equities suffered heavily with the ASX down 2.1%, largely driven by falling commodity prices, as the worsening spread of COVID-19 in China weighed on demand. Asian equities however were mixed with the Shanghai Comp down 1.4% but the Nikkei up 0.4%. This comes despite the worsening Covid breakout currently unfolding in Beijing. Commodities were also mixed with Iron Ore up 0.4% & Copper down 0.6%. A busy day ahead with Australian CPI the main economic release and is likely to show a broadening out of inflation pressures in the quarter amid the strong pick-up in global inflation. Headline CPI inflation is expected to increase +1.8% q/q and ‘underlying’ inflation should come in at around +1.2% q/q. While this would be materially stronger than the RBA’s February trimmed mean forecast of close to +0.8% q/q, it’s not difficult to envisage an even stronger result. Today's CPI data is one of the last key pieces of data the RBA will have before deciding on interest rates Tuesday next week. Given we are in full scale federal election campaign mode, today's result will no doubt be trumpeted from the rooftops by one side or the other.
USD
AUDUSD continues to sell off finding itself at its lowest point since late February, trading at 0.7130 this morning. This continued sell off comes despite the mixed news coming out the US yesterday, with Durable Goods Orders for March printed at +0.8%, up from -1.7% though falling short of expectations of 1.0%. Released later in the US morning, April Consumer Confidence printed at 107.3, up from 107.2 through again short of expectations of 108.2. March New Home Sales fell by 8.6% to 763k against expectations of a 0.6% fall to 768k with the headline result clouded by significant positive revisions. US Equities reacted poorly with the DOW & S&P 500 closing down 2.4% & 2.6% respectively. Tonight, there is a slew of relatively low impact news which will include Monthly Prelim Wholesale Inventories and Pending Home Sales and Crude Oil Inventories. Today's local CPI data will be the focus in the short term.
EUR
AUDEUR opens flat this morning at 0.6701 despite finding some support late yesterday, trading as high as 0.6750 at one point. There was little in the way of data overnight, however ECB member Gentiloni said the EU aims to reduce dependence on oil and gas from Russia by 2/3 by end of 2022, and to zero by the end of 2027. ECB’s Kazak commented that the 2-3 rate hikes priced in by the market is reasonable, and that there is a preference for the first-rate hike to take place in July. European equities reacted poorly with the CAC down 0.5% and the DAX down 1.2% at the closing bell. Looking ahead there is no news of note save the German GfK Consumer Climate report which will be followed by a speech by ECB President Lagarde at a business event in Hamburg.
GBP
AUDGBP has continued to steadily recover from its sharp dip sub-56c on Monday, currently trading at 0.5677. The only data from the UK overnight was UK Public Sector Net Borrowing with the deficit increasing from 14.2B to 17.3B for April. UK Equities did not bleed like its European counterparts with the FTSE closing flat. Tonight, has little in the way of data save CBI Realized Sales figures which is a leading indicator of consumer spending in the UK. Little in the way of UK data until next week's BoE interest rate decision, so Chinese lockdowns, RBA and commodity prices likely to determine movements here in the short term.
NZD
AUDNZD opens only marginally higher this morning at 1.0855, currently looking for direction. Yesterday the only news of note from NZ was Annual Credit Card Spending figures which tripled on March’s figures, up to 3.4%. This outlines a continued increase in credit reliance by NZ which may come as a result of continued costs/inflation increase globally as well as ongoing COVID recovery efforts. Tomorrow morning will see the release of monthly Trade Balance figures which may provide insight into the Kiwis’ economic activity post Covid.