Strong Retail Sales Fuel Rate Hike Bets

AUD

The Aussie dollar opens mixed against the majors, despite the hot Retail Sales data released yesterday morning, printing at 0.9% (est. 0.3%). Commodities did not fare quite as well, with Gold down 0.5%, Silver up 0.8%, Iron Ore down 0.6% and Copper up 0.2%. It was a similar fate for the Asian equities, with the ASX down 0.8% and the Shanghai Comp up 0.1%. The positive Retail Sales data may be what is needed to tip the scales in favor of another rate hike next Tuesday. At 12:30pm today, we have Chinese data being released, with Manufacturing PMI expected to be left unchanged at 50.2 and Non-Manufacturing PMI to have a light increase from 51.7 to 51.9. Economists suspect risk is to the upside as the formal and informal efforts by Beijing begin to find more traction.

USD

The AUDUSD slowly marched up throughout yesterday, opening this morning at a weekly high of 0.6371. Wall Street was strong into the close, with S&P 500 and NASDAQ both up 1.2% and the Dow leading the charge, closing up 1.6%. There was no data released yesterday; however, tonight there are a few important pieces being released. Employment Cost Index q/q is expected to be unchanged at 1%, S&P/CS Composite-20 HPI y/y is looking to increase from 0.1% to 1.8%, Chicago PMI is expected to increase from 44.1 to 45.1 and CB Consumer Confidence expected to decrease from 103 to 100.5. The data releases are unlikely to impact on the Fed's interest rate decision this Thursday morning, as the sharp move higher in long-dated treasury yields has created a meaningful tightening of financial conditions... Which affords the Fed time to wait and assess previous policy decisions.

EUR

After light gains from yesterday’s open till midnight, AUDEUR opens flat this morning at 0.6004. The European equities were soft into the close, with the DAX up 0.2% and the CAC up 0.4%. To the news, yesterday German Prelim CPI m/m read lower at 0.0%, with expectations at 0.2% and previously at 0.3%. Spanish Flash CPI y/y also read lower at 3.5% with expectations at 3.8% from a previous 3.5%. This data shows there is a general trend forming in the eurozone, seeing the rate hikes putting downward pressure on inflation. German Prelim GDP q/q was also released last night, reading -0.1%, with expectations at -0.2% from a previous 0.0%. Tonight, there is a data dump out from the eurozone, with the most crucial being the Core CPI Flash Estimate y/y and the CPI Flash Estimate y/y, both expected to decline from 4.5% to 4.2% and 4.3% to 3.1% respectively.

GBP

The AUDGBP opens relatively flat this morning, seeing a light rally over business hours yesterday, with the pair giving up all of its gains overnight, to open this morning at 0.5237. Looking to the British equities, the FTSE closed up 0.5%. Net Lending to Individuals m/m came out yesterday, reading 0.5B under the expected 2.4B and the previous 2.8B.  M4 Money Supply m/m was a similar story, coming well under at -1.1%, expected at 0.1% from a 0.2%. Although these data sets do not have a large effect on currency markets, they do show how the restrictive policy has been affecting the greater economy. The next piece of important data will be on Thursday, where the Official Bank Rate will be released, forecasts have it being left unchanged at 5.25%.

NZD

The AUDNZD opens slight down at 1.0900 after keeping within a 40-pip range over the past 24 hours. There was no data out of New Zealand yesterday, with this morning having Building Consents m/m coming in -4.7% from a previous -7%. Later this morning we have ANZ Business Confidence, no expectations but was previously at 1.5.