Aussie Consumer Inflation Remains Stubbornly Above Expectations

AUD

Despite stronger CPI Data suggesting a sturdier AUD rally, the Aussie dollar has made only a slight recovery against its counterparts, opening this morning mixed against the majors. Yesterday Aussie CPI came in stronger than expected at 7.3% y/y, 0.1% higher than market expectations and 0.4% higher than previous recordings in October. This stronger inflation reading stokes the flames for more interest rate hikes than previously planned by the RBA. Yesterday we also saw Retail Sales m/m also come in above expectations at 1.4%, up 1% from previous figures and beating expectations by 0.8%. Asian Equities were mixed on close last night with ASX +0.9%, Shanghai Comp -0.2%, and NIKKEI +1%. Similarly, commodities were also mixed with Crude Oil +3.2%, Natural Gas -6.2%, Gold +0.2%, Silver 0.4% and Iron Ore -0.3%. No major local data today only seeing Trade Balance and some mid-tier data out of China in the form of CPI y/y and PPI y/y which isn’t expected sway in the market in any major way.

USD

A relatively subdued trading session saw minimal movement in the AUDUSD pair, briefly touching lows of 6872 the AUD saw a slight recovery to open this morning slightly higher at 0.6906. US Equities closed higher with the Dow Jones +0.6%, S&P 500 +1% and NASDAQ +1.3%. A fairly quiet session on the data front yesterday will be made up for by a data heavy night ahead with the highlight being US inflation figures for December which will be released in the form of CPI m/m, CPI y/y and Core CPI m/m with mixed market expectations. We will also see FOMC Member Harker Speaking along with Unemployment Claims and some other lower tier data.

EUR

After we saw both highs of 0.6442 and lows of 0.6399 the AUDEUR pair held steady this morning opening flat at 0.6422. European equities were higher on close last night with the DAX +1.2% and CAC +0.8%. Another light night for Euro data with only Italian Retail Sales m/m beating expectations and German 10-y Bond Auction. We also saw ECB’s Holzman hit the wires claiming that there is no sign that inflation expectations are de-anchored and that core inflation hasn’t peaked and must be watched closely. Holzman also mentioned the ECB’s determination won’t change until core inflation eases and price data will determine the ECB’s rate path beyond neutral while the ECB is very cautious on moving too quickly with quantitative tightening and that it’s too early to discuss the terminal rate. Another lackluster night in data tonight for the eurozone with only the ECB’s Economic Bulletin. 

GBP

Although we saw a lack of data out of Great Britain, the AUDGBP experienced choppy trading conditions flirting with the 57 handle seeing highs of 0.5699 after slightly dropping off but still opening higher this morning at 0.5669. The FTSE closed slightly higher last night 0.4%. The major piece of market moving data to keep an eye out for is the GDP m/m which is expected to drop 0.7% to -0.2%. This will be accompanied by MPC Member Mann Speaking along with a range of lower tier data.

NZD

The AUDNZD pair saw a steady rally gaining over 60 basis points yesterday, reaching highs of $1.0875 before a steep drop in the early hours of the morning opening today at up at 1.0856. Yesterday we saw ANZ Commodity Prices m/m come in at -0.1%, better than previous readings of -4% as higher aluminum and dairy prices helped offset weaker returns for meat. This morning we also saw Building Consents m/m the seasonally adjusted number of new dwellings consented rose 7%, 17.7% higher than previous figures.