Softer Inflation Reduces Chance of July RBA Rate Hike
AUD
The Aussie dollar is trading lower against the majors today, off the back of yesterday's crucial inflation data which showed a marked decrease, starting a downward trend across AUD currency pairs form 11:30am. Metals experienced a likewise slide across the board, with Gold down 0.3%, Silver down 0.7%, Iron ore down 1.1% and Copper down 1.6%. Asian equities were mixed with the ASX the standout performer, rallying 1.1% as one would expect after the reduction in inflation. The major data released yesterday was the CPI y/y, which was forecasted to drop from a previous reading of 6.8% to 6.1%, but came in well below expectations at 5.6%. Despite this not being a seasonally adjusted inflation measure, which are the RBA's preferred means of gauging inflation, it shows a large reduction, which will no doubt give weight to the likelihood of a rate hike pause during the Cash Rate decision on Tuesday. There is only one piece of data being released today which is the Retail Sales m/m, forecasted at 0.1%, with the previous months being 0.0%.
USD
The AUDUSD slid steadily lower to trade at 3 week lows of 0.6603 this morning after the weaker inflation data yesterday. Wall St was mixed into the close with the Nasdaq trading up 0.1%, the S&P 500 down 0.3% and the Dow Jones down 0.4%. Looking to the data, CB Consumer Confidence came out better than expected, at 109.7, beating the expected 103.9 and the previous reading of 102.5. New Home Sales came out at 763k, also better than the expected 677k and the previous reading of 680k. Fed Powell Spoke last night and had some fairly hawkish remarks, stating that there is a strong majority for two more rate hikes in Dot Plot, and that the Policy hasn’t been restrictive for very long. Tonight Fed Chair Powell Speaks again at the Fourth Conference on Financial Stability, with Final GDP q/q due for release later in the evening. Unemployment claims are also being released tonight, expected to be unchanged from last fortnight's reading of 264k.
EUR
The AUDEUR also on the backfoot into this morning’s open of 0.6045, having given up 2 1/2 cents in the last 2 weeks. In the Eurozone, equities held onto their gains as they moved towards the close with the CAC 40 and Euro Stoxx 50 both up 0.9% and the DAX +0.6%. Looking to the data, Italian Prelim CPI m/m came in at 0%, lower than the expected and previous 0.3%. ECB President Lagarde Spoke last night, saying she is not considering a rate pause at the moment nor are they seeing enough proof that core CPI is moving down. Looking forward ECB President Lagarde will speak again today, along with the German Prelim CPI m/m being released tonight, expected to be 0.2% from a -0.1%.
GBP
AUDGBP dropped heavily yesterday morning, briefly loosing the 0.52 handle before a late afternoon rally, falling off this morning to an open of 0.5219. To the equities, the FTSE saw a gain of 0.5%. Yesterday BOE Gov Bailey Spoke, giving praise to the UK’s economy, saying it was more resilient than expected, however there are clear signs of persistence in inflation and they will do what is necessary to get it to target. Today there is Mortgage Approvals which are forecast at 50k from 49k previously and Net Lending to Individuals m/m forecasted at -0.6B from 0.2B
NZD
AUDNZD bucks the trend and opens higher today, rallying one cent after the post-CPI dip to open up today at 1.0864. There was no data released yesterday. Today at 11am there is one piece of data being released being the ANZ business Confidence, which previously came in at -31.1.