UK Inflation Reaches 2y Lows
AUD
The Aussie dollar traded largely sideways against majors yesterday before falling off steeply this morning. Asian equities finished the day higher with the Nikkei up +1.4% and Hang Seng up +0.6%. The ASX gained +0.7% following a strong overnight lead from Wall St. In Ore gained +0.4%, Silver +1.2% while Gold gave up a slight -0.2%. Yesterday, China held the 1y and 5y Loan Prime Rates at 3.45% and 4.20% respectively. This marks the 4th consecutive hold, with Chinese banks aligning with the central bank's decision, bolstering expectations that further monetary easing will take place in early 2024. No Aussie data today, while we await the tentative release of China's Foreign Direct Investment ytd/y.
USD
AUDUSD found recent comfort in the mid-to-high 67s, having traded relatively sideways over the past 24h before falling sharply this morning to open at 0.6729. Wall St reversed late with all three indices in the red heading into the close, with S&P 500 -1.0%, NASDAQ -0.9% and the Dow -0.6%. CB Consumer Confidence printed at 110.7, up from 101.0 and reflecting an increase in confidence levels, although ‘Family Financial Conditions’ worsened. The higher figure is a reflection of more positive ratings of current business conditions and job availability, as well as less pessimism surrounding businesses, labour markets and personal income prospects over the next 6 months. US previously owned home sales also edged up from a 13-year low. Tonight will bring US Final GDP q/q, Unemployment Claims and the Philly Fed Manufacturing Index. The focus remains on tomorrow evening’s Core PCE Price Index.
EUR
AUDEUR reached 0.6191 overnight before steadily falling to 0.6150. The DAX fell -0.1% and the CAC gained +0.1%. Last night, the Eurozone Current Account surprised to the upside with little impact on FX markets. The German GfK Consumer Climate release also showed sentiment is improving toward the end of the year, after a period of stagnation. The only piece of data from the Eurozone today will be German Import Prices m/m at 6pm, expected to fall -0.4%.
GBP
AUDGDP jumped from 0.5317 to 0.5351 in the early evening in reaction to surprisingly weaker UK inflation data. The pair traded largely sideways before opening today at 0.5321. The FTSE gained 1.0%. The UK’s inflation rate has fallen to the lowest level in 2 years, although their cost of living continues to rise faster than in most advanced economies. Prices rose by 3.9% in the year to November (expectations were 4.3%), in contrast to the US and Eurozone where inflation has eased to 2.1% and 2.4% respectively. This is largely due to the UK’s high food price inflation, having reached 45y highs in November 2022, given increased import requirements. While it has fallen in the year since, it is doing so at a slower rate than other economies. Regardless, the Bank of England is tipped to lower interest rates sooner off the back of lower inflation data. Later today, we’ll see CBI Realised Sales and Public Sector Net Borrowing.
NZD
AUDNZD peaked at 1.0772 yesterday afternoon before retracing slightly to open this morning at 1.0761. RBNZ Governor Orr spoke yesterday morning, indicating that while core inflation metrics remain high, interest rates are currently sufficiently restrictive in reducing consumer expenditure. He also noted the central bank is internalising last week’s “surprisingly subdued” GDP (-0.3% Q3 GDP against expectations of +0.3% growth) ahead of the next monetary policy meeting in Feb 2024. He gave no opinions on what the surprise contraction in growth means with regards for further interest rate decisions. Quiet on the data front for the remainder of the week, with only Credit Card Spending y/y at 1pm today.