Rate Hikes Take Effect as Disinflation Accelerates

AUD

The Aussie Dollar opens mixed across the majors in the aftermath of what was a market-moving inflation print yesterday afternoon. At 11.30 yesterday the CPI y/y data released a result lower than forecasted, coming in at 6.8% for the year which is down from a previous 7.4%. The RBA will be very happy with the result which shows the desired effect of its interest rate hikes is materialising and increasing the argument for a pause in rate hikes as early as this coming Tuesday. This of course is not supportive of a stronger AUD and it dipped in the aftermath however equities were supported by the continuing trend of disinflation, ASX up 0.2% on the close. Commodities were relatively flat with Iron Ore the standout gaining 0.4%. Looking ahead it's a quiet end to the week for local data ahead of Tuesday's RBA rate decision which is looking like it will be a very closely run race.

USD

AUDUSD opens lower this morning at 0.6684, having reached overnight lows of 0.6662 after yesterday’s underperforming Aussie CPI data. A strong night on Wall St saw the NASDAQ close +1.8%, the S&P 500 +1.4% and the Dow Jones +1%. US yields were flat while oil dipped fractionally to $72.90 a barrel. To the US economic data, yesterday's CB Consumer Confidence release outperformed forecast at 104.2 from a previous 103.4 showing an increase in financial confidence in consumer spending. Looking to tonight, we have plenty of data to get stuck into, the main piece being the final GDP q/q data which is expected to remain at its previous 2.7%, alongside US Unemployment Claims figure release, both which have strong potential to create movement in the USD markets.

EUR

A similar story to the AUDUSD here, with AUDEUR opening lower at 0.6163, having recovered slightly from the overnight low of 0.6142 which was also a fresh 18 month low against the single currency. European equities opened higher with the Eurostoxx50 +0.8% and FTSE100 +0.4%. The yield on 10yr Treasuries was little changed at 3.56%. The ECB’s Kazimir commented overnight that core inflation will be the key to rate decisions, adding that while the ECB shouldn’t back down on rates it could maybe slow the pace. To tonight's data, and German Prelim CPI m/m data is forecasted at 0.7% from a previous 0.8%, the prelim release being the Eurozone’s earliest major consumer inflation release, having a strong impact on the Euro markets.

GBP

AUDGBP opens lower at 0.5427 reaching fresh yearly lows of 0.5403 before recovering two thirds of yesterday’s Aussie CPI data downfall. Movements here have been driven by local data in the absence of meaningful data from the UK. UK equities had a decent night with the FTSE up 1.1%. Today MPC Member Mann speaks on Inflation and Monetary Policy with aims to explain his objective to bring services inflation to 2% down from 6% in the second half of this year.

NZD

Contrary to other majors, AUDNZD opens positive at 1.0738, ranging to lows of 1.0686 after the Aussie CPI result before its firm recovery to close ahead on the day. A couple of data points of note from New Zealand today where the effects of monetary policy tightening by the RBNZ begins to feed into the real economy. Building Consents m/m printed first thing this morning and showed a significant contraction of -9.0%, increasing the pace of contraction from the previous result of -5.2%. Late this morning we will get ANZ Business confidence.