AUD Awaits Inflation Data Today
AUD
The Aussie Dollar closed down yesterday after Building Approvals m/m came in far lower than expected missing a 2.3% forecast at -8.1% which moved markets. The ASX also closing the day down -0.1%; Real Estate (-0.9%) and Energy (-0.7%) the biggest movers. Asian equities put up a solid afternoon effort to finish up slightly on the day despite the Shenzhen 300 carving new YTD lows before the break. Commodities had a quiet day with the LME closed, DCE Iron Ore gained 0.6% as CNH looked to pass 7.10. Today RBA Governor Lowe speaks as movement is likely to occur due to a reiterations of the banks slight tightening bias as well as an overview of incoming data and clues for future interest rate decisions. Later today, CPI y/y will be released which is forecasted at 6.4% and is likely to have high impact on currency. Both Construction work q/q and Private Sector Credit m/m to be released also.
USD
AUDUSD is lower this morning at 0.6516 despite ranging up to 0.65588 after the US bank holiday (Memorial Day) with a mixed session on Wall St. with the Nasdaq up 0.3% the S&P 500 up 0.1% and the Dow Jones -0.2%. U.S. 2 and 10-year yields both fell 10bps to 4.46% and 3.69% respectively, while crude oil finished the session -4% at $69.75 a barrel. Into the NY morning and US housing data was released. The FHFA House Price Index for March rose 0.6% to easily beat forecasts of 0.2% with the February numbers revised higher. Case Shiller data also beating expectations for March, rising 0.45% MoM against expectations of a flat result while falling 1.15% YoY against expectations of -1.60%. Little reaction to the data though the USD moved off the lows. Looking forward to this evening, the Fed’s Beige Book will be released. It will be considered by FOMC participants as part of discussions at the upcoming June meeting.
EUR
AUDEUR struggled to hold onto the small gains made during Tuesday’s day session and is now lower at 0.6074 with European equities opened slightly up on the back of Spanish inflation printing lower than expected at 2.9% y/y (exp. 3.3%), Euro Stoxx 50 putting on +0.3% to the DAX’s +0.1% and the FTSE falling -0.1%. Monetary tightening is well underway and the effects on the lending and money channels are clear. April’s weak monetary data adds to a sluggish economic outlook for the rest of 2023 and provides an argument for the doves at the European Central Bank's coming meetings. Bank lending broadly stagnated in April. New loans to households grew at a snail's pace (0.02%) and loans to non-financial businesses dropped slightly compared to March (-0.03%), which was the fifth outright decline in six months. Money growth also fell more than expected as year-on-year growth in broad money (M3) dropped to 1.9% in April with the narrower indicator, M1, falling as much as 5.2%, the fastest decline on record. This evening, the German preliminary CPI m/m will be released and ECB’s Visco will speak at a Bank of Italy Event.
GBP
AUDGBP is lower at 0.5252. A uneventful first day back in the UK after the Bank Holiday on Monday. Tonight MPC Member Mann speaks about central banks, inflation and monetary policy at the Pictet Forum in Zurich. Money markets now price 100bp of Bank of England tightening by November. This would put the Bank Rate at 5.50%. Such an amount of tightening is highly unlikely and that the usually reticent Bank of England may try and verbally push back against it. However, UK data is doing the most of the talking and it will probably be the jobs/wages data (13 June) or the May CPI data (21 June) which will be the key determinant on whether the market reins in aggressive tightening expectations.
NZD
AUDNZD following a similar trend opening this morning down at 1.0781. The only piece of data out yesterday was the building consents m/m which came in at -2.6% after landing at 6.6% in April. In New Zealand today, the ANZ business survey for May will be closely watched for further signs of weakness.