AUD Soars on US Wholesale Price Deceleration

AUD

The Aussie is up this morning, significantly against the Greenback off the back of USD weakness, and slightly against all other majors, with the exception the of the Kiwi. The ASX was up 1.6% after an improvement in general risk sentiment. The Melbourne Institute Inflation expectation for Australia were released yesterday, showing no change on last month at 5.2%. Chinese Trade Balance was also released showing an increase in exports which is a sign the Chinese economy is gaining good momentum out of its lockdown related economic slump. No data out for the rest of the week, while various sources report this morning that RBA Governor Lowe’s term will not be extended in September, with a cabinet meeting later today to decide his successor.

USD

After climbing 1.5% on Wednesday night, the AUDUSD pair climbed a further 1.5% last night to 0.6890 after US producer inflation data arrived lower than expected. PPI m/m for the US was expected at 0.2%, and ended up printing at 0.1%, being the smallest monthly increase in 3 years. This, coupled with Wednesday’s CPI y/y figure (showing 3%, down from 9.1% one year ago), has squashed market predictions of further Fed hikes beyond July. The US terminal rate expectation has shifted down to 5.39% from above 5.45% late last week. Additionally, the Fed’s Waller spoke this morning in New York and noted “inflation has previously exhibited false dawns”. He said he “favours raising rates at July FOMC meeting” and that “likely to need two more 25Bp rate hikes this year”. US equities made healthy gains with the NASDAQ up 1.6%, S&P500 gaining 0.8%, and Dow Jones +0.1%. Last piece of US data for the week is out tonight, being Preliminary UoM Consumer Sentiment, currently expecting an improvement on last month’s figure at 65.5 vs the previous 64.4.

EUR

AUDEUR made minor gains overnight, up about 40bps, currently sitting at 0.6136. US inflation data, whilst causing US weakness across the market, also improved global risk sentiment which can often help the Aussie dollar. Low tier data out of the EU last night with French Final CPI coming in at expectations of +0.2%, Eurozone Industrial Production m/m coming in slightly worse than expectation and ECB Monetary Policy Meeting Accounts underlining ECB hawkishness going forward, with President Lagarde hinting at a July hike. Similar low tier data out today, Italian Trade Balance, expecting an increase in exports, German Wholesale Price Index, expecting a drop in prices, and it’s a French Bank Holiday today.

GBP

AUDGBP also boasted minor gains over night, moving up 0.4% to this morning’s level of 0.5245. With global risk sentiment helping float the Aussie dollar against the Pound Sterling. The most major piece of data out of the UK last night was GDP m/m which came in better than the expected -0.3% at -0.1%. A flurry of minor UK data was released with the stand outs being Goods Trade Balance coming in lower than expected, showing an unexpected boost in imports (-18.7B vs -14.9B expected) and Manufacturing Production m/m arriving better than expected at -0.2%, vs -0.5% expected. 

NZD

AUDNZD is flat vs this time yesterday, moving both sides of current levels by 0.2% overnight before returning to 1.0775. No data from New Zealand today, with a bank holiday for the country in observance of Matariki.