Tonight's US CPI to Guide Short Term AUDUSD

AUD

The Aussie dollar opens slightly down against majors while the ASX finished Tuesday’s session down 0.2% with real estate the biggest loser. The Asian equities had mixed closes, with the Hang Seng down 1.9% and the Nikkei up 1%. Last night the Australian Government released the 2023-24 Budget, with GDP expected to slow to 1.5% in 2023-24 and CPI to slow to 3.25% in 2Q24 working off iron ore price assumptions of $60/tonne, metallurgical coal $140, thermal coal $60 and LNG $10. Australian Retail Sales m/m came in as predicted at 0.4% which is steady on the prior month. Only marginal changes when it comes to commodities, with Gold up 0.2%, Silver up 0.1%, Copper down 0.6% and Iron Ore up big at 1.9%. Looking ahead and it's a quiet domestic data calendar with some Chinese Loans data tentatively pencilled in for some time this week. The big data piece is US inflation tonight (see below).

USD

AUDUSD opens down at 0.6763 after subdued trading as traders eagerly await tonight's all important CPI data. Wall street also had another subdued session, with the S&P 500 down 0.4%, the Dow Jones down 0.2% and the NASDAQ closed down 0.6%. FOMC Member Jefferson Spoke last night, reaffirming a positive economic sentiment, stating inflation has started to come down and the economy has started to slow in an orderly fashion. Expect volatility with the US Dollar tonight, as CPI data releases. CPI m/m is tipped to come in at 0.4%, CPI y/y is predicted to come in at 5.0% whilst Core CPI m/m is expected at 0.3%. If these CPI measures remain stubbornly high, it is likely to result in further USD strength and could consign AUDUSD back down to the 10 week range of 0.6565-0.6806 until the next test of resistance. However if US CPI numbers start to ease, AUD could get the green light to push above and beyond resistance which sits just above 0.6800.

EUR

AUDEUR opens relatively flat at 0.6167 having traded a very tight 24 pip range in the last 24hrs. European equities were down, with the CAC closing down 0.6%, Eurostoxx50 was also down 0.6% while the DAX closed flat. One piece of minor data came out of Europe yesterday, with the French Trade Balance coming in above the expected -9.5B at -8.0B. There was plenty of chatter from ECB members overnight, ECB’s Kazaks commented that doing too little to tackle inflation remains the greatest danger with still quite some ground to cover. He continued saying bets on Spring 2024 ECB cuts are significantly premature, adding that it is not impossible for the ECB to hike or pause while the Fed cuts. Other ECB members echoed these sentiments that inflation remains stubborn and more monetary policy tightening will be required. Today we have German Final CPI m/m tipped to come in at 0.4%, Italian Industrial Productions m/m expected at 0.2% as well as the German 30-y Bond Auction.

GBP

AUDGBP opens down at 0.5357, echoed by the FTSE which dropped by 0.2% at the close. Yesterday’s Halifax HPI m/m missed expectations significantly, expected to come in at 0.2% but came in at -0.3%. No data coming out of Britain today, with their only economic release being heir 10-y Bond Auction.

NZD

AUDNZD opening down at a familiar 1.0670. The quiet week continues for the NZ data, with no data released today. Looking forward, markets are waiting for Inflation Expectations q/q set for release on Friday.