AUD Consolidating Recent Gains

AUD

Australian dollar has strengthened noticeably across the board since Wednesday, the gains stemming from strong inflation data on Wednesday, followed by a general risk-on mood allowing consolidation at these higher levels. Asian equities were mixed on the close with the Hang Seng +2.4% after returning from the Lunar New Year holiday, the Nikkei finished down 0.1%. The ASX was closed yesterday with the domestic market celebrating the public holiday. Gold is up 0.2%, Silver 0.4% and Iron Ore 0.4%. On Wednesday we had stronger than expected CPI data, supporting the case for further central bank policy tightening. Australia's yearly CPI rate increased to 8.4% and the number for Q4 alone was 1.9%, both results decently higher than was expected. Such strong data was more than twice the pace of wage growth and cemented expectations of an interest rate hike of 25 basis points in February. We have no other significant data coming out today.

USD

AUDUSD reached a new 5 month high of 0.7142 early this morning before moving slightly back down to its current position of 0.7113. Wall St equities closed higher with NASDAQ trading +1.3%, the S&P 500 +0.7% and the Dow Jones +0.4% on close. To the data, and US Q4 GDP printed at 2.9%, down from 3.2% though better than estimates of 2.6%. Personal Consumption fell to 2.1% against expectations of an increase to 2.9% while Core PCE was 3.9% as expected. December Durable Goods Orders rose 5.6% to easily beat estimates of +2.5% though the ex-transport measure was -0.1% against expectations of -0.2%. Also released and weekly jobless claims data was mixed with initial claims falling to 186k to beat expectations of 205k though continuing claims rose to 1.675 million to fall short of expectations of 1.658 million. Finally, December Wholesale Inventories were +0.1% to come in short of forecasts of 0.5%. Today we have US PCE inflation for may which may show further evidence of disinflation. The headline figure should be aided by gasoline price relief. This release could influence 1Q23 real GDP forecasts.

EUR

AUDEUR pushed higher, once again reaching failing at resistance of 0.6543 which has held firm since early October last year before opening slightly lower this morning at 0.6525. Eurostoxx 50 closed higher at 0.75%. On Wednesday German IFO Business Survey for January rose to 90.2 from 88.6 though this was short of expectations of 90.3. Spanish unemployment took a turn for the worse, increasing to 12.9% form a 12.4% expected. Belgium's NBB business climate also printed worse than expected at -13.5. Tonight, we have Spanish Flash GDP q/q data expected at 0.1% which is flat from its previous release, as well no data over the weekend.

GBP

A rocky road for AUDGBP as it pushed up neatly to a 3-month high of 0.5770 before moving back down to 0.5728. Britain’s input PPI m/m data printed worse than expected at -1.1% from a -0.8% expected and a -0.2% previous not showing too many signs of slowing down. Same outcome with Output PPI m/m printing -0.8% from a 0.1% expected as well previous. CBI Realized Sales saw -23 from +2 expected but saw no significant impact on the strength of the pound.

NZD

A solid spike for AUDNZD leaving the 1.08 zone to touch a 2 month high at 1.0985 before retracing down to 1.0951. New Zealand’s quarterly inflation stood at 1.4% from a 1.3% expected, making noticeable progress moving down from its previous 2.2%. Annual inflation was 7.2%, unchanged from the third quarter, Statistics New Zealand said Wednesday in Wellington. Economists expected 7.1%. Consumer prices advanced 1.4% from three months earlier, exceeding the 1.3% median estimate. The annual inflation rate is lower than the Reserve Bank’s forecast of 7.5%, but its failure to slow suggests further monetary tightening is required to cool demand.