China's Inflation Data Due This Morning
AUD
The Aussie Dollar has slipped off yesterday's highs due to a risk-off environment ahead of the release of Chinese and US Inflation data. Asian equities were mixed on the close with the Nikkei down 0.9%, and the Shanghai Comp up 0.3%, with the ASX posting modest gains of 0.1%. In Commodities, Gold was flat, Silver gained 0.3%, Copper was flat, and Iron Ore was the star performer gaining 1.2%. Yesterday, Westpac Consumer Sentiment came in at -0.3%, matching previous results of -0.3%. NAB Business confidence was released, and printed a figure of 7, up from a previous result of 2. A quiet day today in the way of Aussie economic data. China's Hainan, an island province dependent on tourism, locked down more areas on Monday, state media reported, as it battles its worst COVID-19 outbreak after seeing very few cases in the past two years compared with many other regions in the country. The province, which recorded just two local symptomatic COVID cases last year, has reported more than 1,500 domestically transmitted infections this month, including over 1,000 symptomatic ones. Although that is low by global standards, it is Hainan's biggest outbreak since the virus was first reported in the central Chinese city of Wuhan in late 2019. The focus this morning will be China’s CPI inflation data, which may approach 3% y/y in July after rising 2.5% y/y in June, as the price of pork was up over 30% from the previous month. Meanwhile, PPI inflation could moderate to around 4.5% y/y in July after rising 6.1% y/y in June, thanks to the sharp correction in commodity prices. Looking ahead, a quiet day tomorrow, with MI Inflation Expectations to be released, but not expected to move markets.
USD
AUDUSD trades lower this morning, having touched lows of 0.6949 before recovering to 0.6965 at time of writing. US Equities did not fare well yesterday, with the Dow Jones losing -0.2%, the S&P 500 losing -0.4%, and the NASDAQ losing being hit the hardest, down -1.2%. Market players await tonight's important US CPI figures, hoping pricing pressure has started receding in July. The 8% decline in gasoline prices recorded in July should provide some relief to headline inflation. Nonetheless, core inflation is likely to show continued strength underpinned by core services and rising shelter costs. Still, the core annual reading is foreseen advancing to 6.1% from the current 5.9% level. At the end of the day, speculative interest will rush to price in whatever they believe the Federal Reserve will do with the monetary policy. Looking ahead, PPI data will be released tomorrow evening, along with Unemployment Claims data.
EUR
AUDEUR trades lower this morning, having touched lows of 0.6806 before coming back up to trade at 0.6818 at time of writing. An abysmal day for equities in Europe yesterday, with the CAC losing out -0.5%, and the DAX losing out -1.1%. The Euro was weighed by headlines indicating that Russia reportedly suspended oil flows via the southern leg of the Druzhba pipeline, amid transit payment issues. The energy crisis affecting Europe has led to the UK government planning potential organised energy blackouts this winter for industry and households as a worst-case scenario. In economic data for Europe, German Final CPI data will be released this evening.
GBP
AUDGBP trades lower this morning, having touched 2-and-a-half-week highs of 0.5786 before trickling back down to trade at 0.5764 at time of writing. In equities, the FTSE fairly flat, gaining 0.1%. The Bank of England is going through the tedious task of handling the roaring price rise index. The inflation rate is 9.4% in the pound zone on an annual basis and BOE Governor Andrew Bailey in his commentary on monetary policy announcement cleared that the inflation rate could go to 13%. So, a consensus of galloping inflation is sufficient to scare out the market participants. In addition to that, de-growth in paychecks by the UK households is an additional mess for the BOE. On the economic data front, a preliminary estimate for the UK GDP is 2.8% vs. 8.7% the former release on an annual basis. While the quarterly data is expected to report a shrink in economic activities by 0.2% against the expansion of 0.8%. Looking ahead on the economic docket for the Pound, a quiet day tomorrow with RICS House Price Balance to be released tomorrow, and is not expected to have any hefty market impacts.
NZD
AUDNZD trades lower this morning, having scraped lows of 1.1047 before coming back down to trade at 1.1073 at time of writing. Nothing today on the economic docket for New Zealand, however looking ahead BusinessNZ Manufacturing Index will be released on Friday.