Chinese Inflation Data Due Today
AUD
AUD seesawed throughout the Tuesday session and throughout its downward trajectory, registering monthly lows across some G10 currencies. Asian Equities were mixed on the close with the Shanghai Comp gaining 1.1% while the Nikkei closed in the opposite direction, down –0.6%. The ASX fell 1% on Tuesday with commodity prices (See below) and mining shares struggling to stay in the green. Commodities were largely down with Crude Oil down -3.2% to $99.8 a barrel and Gold, Silver and Copper closing in the red. It was a quiet evening for domestically with no macroeconomic data of note. Looking forward, Australia’s Westpac Consumer confidence for May will be the first key data event of the day followed by April CPI (Consumer Price Index) and PPI (Producer Price Index) for China with expectations that CPI would have picked up due to the disruption by the covid outbreak.
USD
AUDUSD meanders on major support levels after a turbulent start to the week with the pair trading as low as 0.6910, a two-year low, before coming back to trade at 0.6937 this morning. US Equities ended mixed on the Tuesday close with the Dow Jones trading its fourth day of straight losses, down -0.3%, while the SPX gained 0.2% and the Nasdaq advanced 1%. No domestic data of note out of the US, attention likely paid toward the Fed policymakers crossing the wires to convey their take on the US central banks moves. Most of them backing a 50bps rate hike at the next meeting. However, comments from Fed president and FOMC member Loretta Mester saying that they don’t rule out a 75bps rate hike forever. Little reaction to the data. To the data ahead and to the US, major attention will be given to the US CPI data as markets expect the first softer inflation reading at 8.1% YoY versus 8.5% prior. Any disappointments from the key inflation numbers will be boost for potential upside in the AUDUSD.
EUR
AUDEUR continued its downtrend and slid to as low as 0.6545 on Tuesday before coming back to trade at a rate of 0.6584 this morning. European Equities gained only slightly on Tuesday as traders returned to risk assets with the DAX gaining 1.2% while the CAC advancing modestly up 0.5%. In early European data, Italian March Industrial Production MoM was 0.0% beating estimates of -1.5% (4.0% previously). German ZEW Expectations for May were -34.3 (-43.5 expected). Eurozone ZEW Expectations for May were -29.5 an improvement from a previous -43.0. Following a better-than-expected German Economic Sentiment, ECB Member Nagel said that the bank should hike rates in July if incoming data suggests that inflation is too high. In data this evening, there’s a flurry of economic releases with German CPI MoM and ECB Lagarde being the headline releases.
GBP
AUDGBP followed suit amongst its peers and seesawed, but remained only a handful of pips above Tuesday lows, trading at a rate of 0.5633 this morning. FTSE 100 closed higher on Tuesday but volatility still dominated the market sentiment, the blue-chip benchmark finished the day around 0.37% higher. Earlier this morning, UK’s National Institute of Economic Social Research crossed the wires by saying that ‘The BoE will need to raise interest rates to 2.5% and keep them there until the middle of the decade in order to bring soaring inflation under control’. Money markets are pricing in 125-150bps of total tightening over the next 12 months and that would see the policy rate peak between 2.25%-2.50%. No key data among the releases today with a flurry of data for the pound on Thursday evening with UK GDP being the key data of note.
NZD
AUDNZD bucked the trend and trades against the grain, trading higher at a rate of 1.1023 at the time of writing. NZ data seems to be ignored by markets as the flight-to-safety bid continues amid rises in inflation and risk aversion, likely at the expense of the kiwi. Investors may wait for fresh catalyst over the next 24 hours as participants await US consumer inflation figures this evening as well as major Chinese PPI and CPI data today.