Latest Inflation Data Tipped to Cool Today
AUD
The Aussie dollar opens slightly up against majors with the ASX being yesterday’s star performer, up +1.05% led by energy and material stocks. Yesterday’s subdued domestic Retail Sales data (+0.2% in Feb following +1.8% in Jan) reinforced ideas that the economy is slowing and that the RBA may pause rate hikes when they meet next Tuesday. The final piece of the puzzle will arrive today with Aussie CPI y/y expected at +7.2%, down from last month’s +7.4% which may further affirm the Board’s view that inflation peaked in Q4 2022. Even so, services inflation is expected to have remained fairly strong amid the pickup in labor cost growth. Depending on where the CPI data lands late this morning, we could see brief volatility in AUD pairs.
USD
AUDUSD opens higher at 0.6707 while a quiet night on Wall St saw the three major indices finish the session in negative territory. The NASDAQ led the way down -0.7%, while both the Dow Jones and S&P500 ended the session -0.4%. US consumer confidence improved in March, with the Conference Board index hitting 104.2, despite concerns about bank failures and what it could means for deposits. Assuming stability returns to the banking sector, the improvement in sentiment indicates ongoing healthy consumer spending growth in the near term, while ongoing household financing pressures keep a foot on mid-term expectations. On Thursday evening we’ll see US Final GDP q/q, with the economy expected to have grown +2.7% following the previous quarter’s surprise +3.2% figure.
EUR
AUDEUR opens up at 0.6186 with the DAX and CAC both posting minor gains of +0.1%. Little data in the past 24h, while ECB President Lagarde has urged banks to “cooperate” and “not compete” in the current climate as various parties strive to maintain a safe and strong system. Tomorrow we’ll see German and Spanish CPI data, with the downward trend expected to continue as supply chain issues ease, retail energy prices continue to fall & cost of living pressures weigh on households. Earlier this week, Isabel Schnabel reinforced her status as one of the ECB’s more hawkish members, having indicated she would’ve liked the March statement to include the possibility of further rate hikes. Markets are now pricing in 46bps of hiking by September.
GBP
AUDGBP opens up at 0.5435 while the FTSE posted minor gains of +0.2%. Recently, the Bank of England’s Governor Bailey stated rates should not be taken to 2008 highs, while stressing how the UK banking system is in s sound position and that inflation remains the Bank’s key focus. If inflationary pressures persist, further tightening may be necessary. Tonight, we’ll see the Financial Policy Committee’s most recent meeting minutes which will provide in-depth insights into financial conditions & decisions towards financial stability.
NZD
AUDNZD opens relatively flat at 1.0727 with no data on the table today. Tomorrow, we’ll see business confidence figures which are expected to further the pessimistic trend in Kiwi Land as the RBNZ’s interest rate hiking campaign weighs on firms’ cost of capital.