US Raise Rates by 25bps, Europe to Follow Tonight
AUD
A miss in the Australian CPI figures yesterday lead to AUD weakness across the board, which is opening lower against all majors this morning. In June, monthly inflation dropped to 5.4% YoY as expected. However, last month's inflation was revised down to 5.5%, resulting in a higher-than-expected month-on-month increase of 0.7%. These revisions also led to a decrease in the 2Q23 quarterly inflation rate to 6.0% YoY from 7.0%. Additionally, the trimmed mean core inflation rate declined to 5.9% from 6.6%, and the weighted median rate decreased to 5.5% from 5.9%. Asian Equities closed mixed with the ASX +0.8%, Shanghai Comp -0.3%, and Nikkei flat. Commodities also mixed with the standout being Natural Gas -10%, Crude Oil -0.9%, Gold -0.2%, Silver -0.5%, Iron Ore -0.3% and Copper also -0.3%. A quieter day ahead for the Aussie Dollar, with only the release of the Import Prices q/q.
USD
Despite seeing a rally of close to half a cent after the release of the Fed’s Interest Rate decision the AUDUSD pair quickly retraced and opens lower this morning at 0.6759. The FOMC delivered the widely anticipated 25bps hike overnight brining the rate to 5.5% for the first time since January 2001. The accompanying statement provided little in the way of new information, noting that the fed would continue to assess incoming information to determine the extent of any additional policy firming. Chair Powell began his press conference by stressing that inflation was too high, that the Fed was highly aware of the risks inflation posed to their dual mandate and that they remained fully committed to bringing it back to target. There was little reaction from Wall Street with the and Nasdaq and S&P 500 loosing 0.1% and Dow Jones only gaining 0.2%. No Breather for the US tonight as we await the release of Advance GDP q/q (expected to drop 0.2%), Unemployment Claims (expected to increase by 6k) as well as Pending Home Sales m/m and Durable & Core Durable Goods Orders m/m.
EUR
A fairly subdued night for European data didn’t allow the Aussie dollar to make up for any lost ground, with the AUDEUR pair opening lower this morning at 0.6096. European Equities closed lower with DAX -0.5% and CAC -1.4%. Last night we saw M3 Money Supply y/y and Private Loans y/y both miss expectations with little reaction from the markets. Tonight we have Europe’s Main Refinancing Rate released with markets pricing that there will be another 25 bp hike to bring the rate to a post-GFC high of 4.25%. All eyes will be on the accompanying statement, ECB’s rhetoric is likely to be deliberately vague regarding potential policy moves beyond the July meeting, with data-dependence continuing to be noted.
GBP
A data-less night for the Brits has allowed the Pound to take full advantage of AUD weakness, with the AUDGBP pair losing half a cent to open this morning at 0.5225. British Equities moved slightly lower on close, down 0.2%. No data out yesterday, and only CBI Realized Sales to be released later tonight.
NZD
The AUDNZD gave up any gains made in Tuesday’s session, losing the $1.09 handle to open this morning at $1.0881. Another data-less yesterday will be followed by a data-less today and tomorrow. Markets patiently await next weeks employment data on Wednesday.