AUD Takes Advantage as US CPI Falters
AUD
The Australian Dollar had a stellar performance overnight, printing fresh highs against some major G10’s as US CPI data failed to meet expectations (See USD section). Asian Equities were mixed on the close with the Shanghai Comp up +0.3% while the Nikkei lost ground at -0.9%. Domestically, the Australian Stock Market gained a modest +0.1% on the close. In the event on Wednesday, China’s July CPI index and PPI index inflation came in lower than expected. CPI increased to 2.7% YoY, while PPI inflation fell 4.2%. To the data ahead, August consumer Inflation expectations today. Consumer wages will be the key focus, previously consumers reporting seeking weak wages and growth. In other data that will be key for the Aussie, traders will need to wait for the July employment report on 18 August.
USD
AUDUSD hit a 2-month high of 0.7108 overnight, underpinned by soaring equity prices and the broader Greenback’s weakness, trading at a rate of 0.7084 at the time of writing. The Aussie pair rallied the most since mid-June after weaker than expected inflation figures tamed market expectations of continuing aggressive fed rate hikes. The CPI for July was flat MoM, down from 1.3% and well below expectations of 0.2% with the yearly print at 8.5%, down from the 9.1% originally forecasted, and below expectations of 8.7%. Core measures also fell and were also lower than expected, printing at 0.3% MoM and 5.9% YoY, both lower by 0.2% than consensus. Wall Street jumped off the news, heavily in the green with the Nasdaq up +2.7%, the S&P 500 +2.1% and the Dow Jones finished the session up +1.5%. Looking ahead, US PPI for July will be released tonight, the a weak headline measure could be misleading driven by a decline by volatile energy prices during the month.
EUR
AUDEUR followed suit higher, supported by weaker US CPI data, printing a fresh three-week high of 0.6886 with the pair now trading at a rate of 0.6875. European Equities fell short as the German DAX dipped -1.1%, while the French CAC closed down -0.5%. To the data front in Europe, German final July consumer price inflation came in at 7.5% year-on-year and 0.9% monthly, official figures revealed Wednesday, roughly in line with expectations. As for the data ahead, there’s a flurry of Eurozone data tomorrow with French CPI, Italian Trade Balance and the Bloc’s Industrial Production data. In the meantime, AUDEUR traders will likely pay attention data elsewhere with US PPI data to entertain markets and may provide fresh impetus for the pair.
GBP
AUDGBP gained positive bid tone and shot to a 3-week high of 0.5798 before the pair came back to trade at a rate of 0.5798 at the time of writing. The FTSE 100 closes firmer but off highs, at the close, the London Benchmark up 18 points or 0.3%. On the UK data front, Consumer confidence rose in July, possibly due to the UK government's cost-of-living payments, according to a YouGov survey, a rare beacon of light in amongst the gloomy scenarios being painted as the cost-of-living squeeze intensifies. The pound bulls are awaiting the release of the Gross Domestic Product (GDP), which will be released Friday evening. As per the preliminary results, the UK economy has shrunk by 0.2% in this quarter vs the expansion of 0.8% reported earlier. On an annual basis, the economic data is expected to drop to 2.8% from the former figure of 8.7%.
NZD
AUDNZD bucked the trend amongst its peers, with the pair trading lower at a rate of 1.1053 at the time of writing. Despite a busier session elsewhere with the lower than expected US CPI data, there was little action for the Kiwi as both currencies shared eachother's fortunes. Little in the way of data due from NZ with the FPI data (Food Price Index) released tomorrow. Traders may look elsewhere for fresh impetus with US PPI data to entertain markets this evening.