Markets Await US CPI Data This Evening

AUD

The Aussie dollar opens mixed against majors while a choppy day in Asian equities saw the Shanghai Comp down -0.2% and Nikkei up +1.0%. The ASX ended yesterday’s session up +0.2%. Conflicting business and consumer confidence data shows ongoing resilience to higher interest rates and elevated price pressures within the business sector, while consumer confidence fell further into ‘deeply pessimistic’ territory. This highlights the divergent responses of the corporate and household sectors to tighter policy. Currently, the Reserve Bank of Australia is in ‘watch and wait’ mode. No meaningful data today, although tomorrow morning we’ll see the Aussie Unemployment Rate and Employment Change m/m.

USD

AUDUSD seems to have found comfort above the 64 handle (for the time being), having bottomed out at 0.6408 yesterday evening before opening today at 0.6425. The technology sector weighed on Wall St. overnight and saw the NASDAQ close -1.1%, while the S&P 500 fared a little better at -0.5% and Dow Jones -0.1%. Little data ahead of tonight’s monthly CPI report, where rising energy prices are expected to contribute to the highest headline figure in 14 months (0.6%). The data will provide insight into what else the Federal Reserve may need to do in order to pull inflation back to its target band of 2 to 3% y/y, particularly given signs of a cooling labour market have stoked optimism that the Fed may be finished hiking interest rates. Currently, futures traders see roughly a 50% change of another hike in November. As per usual, volatility is expected surrounding inflation prints, which could some fireworks for the AUDUSD pair later this evening.

EUR

AUDEUR climbed throughout the day yesterday, briefly touching 0.6005 before retracing to open at 0.5979. Quiet on the data front yesterday, with only the German ZEW Economic Sentiment survey being looked out for. Printing at -11.4 against expectations of -15, this reflects a slight improvement in expectations of Germany’s economic situation over the next 6 months, although overall the figure remains pessimistic. Little data releases ahead of tomorrow evening’s European Central Bank interest rate decision, with the subdued eurozone macro-outlook keeping a lid on ECB hike expectations. In short, the ECB’s data dependency monologue has curbed its ability to make credible commitments with regards the current rates outlook, particularly given the economic slowdown reflected in recent economic data. For this reason, a surprise hike from the ECB tomorrow could open the door for AUDEUR to fall further.

GBP

AUDGBP has given back almost all gains made since yesterday’s jobs report, having peaked at 0.5158 in the early evening before trending downward to open at 0.5138. Although the Average Earnings Index 3m/y printed at +8.5% (expectations were +8.2%), the UK jobs report is more dovish than it looks. Private sector wage growth in the UK barely increased between June and July, while payroll data shows a second consecutive fall in median pay. Economists are still expecting another interest rate hike from the Bank of England next Thursday, although the case for further hikes beyond this remains weak. This afternoon we’ll see the UK quarterly GDP figure. No expectations have been posted.

NZD

AUDNZD gained minimal ground yesterday, trading largely sideways throughout the evening to open slightly up at 1.0884. Another quiet week on the Kiwi data front, with only their Food Price Index today and BusinessNZ Manufacturing Index on Friday. Neither typically move markets. The next notable data release will be quarterly GDP, next Thursday September 21st.