AUD Bounces Back After Lower CPI

AUD

 After seeing a pretty volatile night, the Aussie dollar starts the day mixed across the board. Asian equities closed mixed yesterday with the ASX +1.2%, Shanghai Comp flat, and Nikkei +0.3%. Commodities were also mixed with Crude Oil +0.6%, Natural Gas +3.1%, Gold -0.1%, Silver -0.4%, Iron Ore +0.2% and Copper flat. Australian data took center stage yesterday with monthly CPI, construction work done and building approvals all coming in weaker than estimated. July CPI y/y landed at +4.9%, short of +5.2% expectations, seeing the AUD slide immediately across the board before regaining lost ground in the following hours. Notably, AMP deputy chief economist Diana Mousina said this meant the RBA could stop raising interest rates. "Looking ahead, unless wages growth surprises to the upside or inflation starts heading up again (rather than down), interest rates are likely to remain unchanged throughout the rest of 2023." Today's main events is China’s Manufacturing and Non-Manufacturing PMI, which are both expected to come in relatively flat, so any surprises here could spark volatility.

USD

Despite approaching 3-week highs of 0.6521, the AUDUSD pair opens flat this morning at 0.6479. Wall Street closed slightly higher with the Dow Jones +0.15%, S&P 500 +0.3% and NASDAQ +0.5%. Last night we saw a few data misses out of the US which sparked the brief rally. US ADP Non-Farm Employment Change for August printed at 177k, down from an upwardly revised 371k and coming in below expectations of 195k. Released shortly afterwards, Q2 GDP was revised down to 2.1% from an initial reading of 2.4% with Personal Consumption revised up to 1.7% from 1.6% though this was short of expectations of 1.8%. Further US data coming in the form of July Pending Home Sales rose by 0.9% MoM to easily beat expectations of -1.0%. Looking forward, tonight’s main events include Core PCE Price Index m/m followed by Unemployment Claims. These releases will affect market sentiment toward monetary policy. A decline in initial jobless claims, pickup in personal spending and sticky inflation would raise bets on a September Fed rate hike, which could see AUDUSD dip into the 63s.

EUR

The AUDEUR pair saw a half cent range over yesterday’s session, opening this morning on the lower end at 0.5927. European equities closed slightly lower with the DAX -0.2%, and CAC -0.1%. Yesterday we saw German CPI for August print at 0.3% m/m as expected, though the y/y result was 6.1% against expectations of 6.0%. We also saw Spanish Flash CPI y/y come in above the expected 2.5% at 2.6%, not much reaction from markets. Looking to the day ahead, there are quiet a few data pieces set to be released with the standouts being Core CPI Flash Estimate y/y and CPI Flash Estimate y/y for the Eurozone.

GBP

After seeing highs of 0.5133 the AUDGBP rate quickly retraced to open this morning lower at 0.5095. UK equities were relatively flat with the FTSE gaining 0.1%. A relatively quiet day for the Brits yesterday, only seeing a few low-tier data pieces with M4 Money Supply m/m and Mortgage Approvals both missing expectations and et Lending to Individuals m/m coming in flat. Today, the only notable event is MPC Member Pill Speaking.

NZD

The AUDNZD pair touched lows of 1.0850 early in yesterday’s session, before steadily rallying to reach highs of 1.0890, opening slightly lower but still up at 1.0880. A quiet week continues for New Zealand, only having seen Building Consents m/m which moved from last month's 3.4% to -5.2%. Today we have the last piece of data for the week in the form of ANZ Business Confidence, which previously came in at -13.1.