US to Kick Off Week of Disinflation Tests
AUD
The Aussie Dollar strengthened in the overnight session, while the ASX closed down -0.4% as CSL dragged the index, while tech stocks and consumer discretionary outperformed. Quiet on the data front yesterday with China out of action all week for the Spring Festival. Later this morning, we’ll see Westpac Consumer Sentiment and NAB Business Confidence data. The main domestic focus this week will be our Unemployment Rate and Employment Change on Thursday. Notably, the Unemployment Rate is tipped to hit 4.0% (previous reading 3.9%) for the first time in nearly 2 years. This comes as the economy continues to feel the aftermath of the RBA’s most aggressive interest rate hiking cycle in 14 years. The Cash Rate remains at 4.35% currently.
USD
AUDUSD shot up to 0.6548 early this morning before retracing a tad to open at 0.6526, being higher than yesterday morning. Wall St. was mixed overnight with the Dow Jones trading +0.3%, the S&P 500 -0.1% and the NASDAQ -0.3%. Little notable releases from the US overnight, with all eyes on this evening’s CPI print. The annual figure is expected at 2.9% (previous figure 3.4%), which would take the inflation rate within the Fed’s 2-3% target for the first time in nearly 3 years. On the other hand, the Core figure is expected to remain at +0.3% m/m and investors may need to look elsewhere to fine tune Fed rate cut expectations, which currently see a first cut in June. A weak Retail Sales figure later this week could bring rate cut expectations forward into May and edge the greenback lower.
EUR
AUDEUR reached brief highs of 0.6068 in the overnight session before opening today at 0.6060. European equities performed well with the DAX +0.7% and CAC +0.6%. Commentary from European Central Bank officials has increased in the past few days, and so has a divergence in views expressed by different members. Panetta remarked the time for monetary easing ‘is fast approaching’, while Schnabel warned against cutting too soon. Markets will tune into ECB President Lagarde when she speaks on Thursday evening. In the meantime, tonight will bring the German ZEW Economic Sentiment survey. Overall, another quiet week in terms of Eurozone data.
GBP
AUDGBP peaked at 0.5175 overnight before opening today at 0.5159. UK equities were flat. The Bank of England’s Governor Bailey spoke this morning, indicating he ‘wouldn’t put too much weight on whether the UK enters a technical recession’ and that ‘any UK recession will be shallow’. A data-heavy week ahead for the Pound, kicking off early this evening with the UK Claimant Count Change and Average Earnings Index 3m/y. The main event for the week will be UK CPI tomorrow evening, expected to land at 4.1% for the year, up a tad from last month’s yearly figure of 4.0%. Most economists see both wage growth and services inflation remaining relatively persistent in Q1 2024, meaning the Bank of England will have no rush to turn to a more dovish narrative in the near-term. Markets currently see the BOE moving with a delay (expected to cut in August) relative to the Fed’s and ECB’s projected interest rate easing cycles.
NZD
AUDNZD has reclaimed ground after sharp losses on Friday evening saw the pair stoop to 9-month lows of 1.0586. The pair steadily climbed over the past 24h to open today at 1.0648. This comes despite relatively hawkish commentary from RBNZ Governor Orr yesterday, where he indicated NZ inflation remains elevated, leading to the maintenance of the Overnight Cash Rate at 5.5%. At 1pm today we’ll see the main Kiwi event for the week, being Inflation Expectations q/q.