Today: Aussie CPI and RBNZ Decision
AUD
The Aussie Dollar gained a small amount of ground against majors over the past 24h despite little economic data and largely poor results from commodities, with SGX Iron Ore -0.5% as well as Gold and Silver -0.1%. Asian equities closed mixed with the Nikkei flat, Hang Seng up +0.9% and the ASX 200 +0.1%. Australia’s CPI for January will be released at 11:30am today (exp. 3.6% y/y, prev. 3.4%). The first month of each quarter for Aussie CPI provides a relatively limited read on broader inflation, as it is mostly focused on goods prices, rather than services. Given the RBA’s greater focus on services price inflation, the January CPI data isn’t likely to play much role in influencing the central bank’s current outlook. Regardless, we can expect to see some volatility in the late morning depending on where the figure lands relative to 3.6% y/y expectations. Adding to the mix will be tomorrow’s Aussie Retail Sales data, adding further potential for AUD advances (if strong).
USD
An empty data calendar didn’t prevent the AUDUSD from gaining traction during the front half of yesterday’s session, with the pair climbing to 0.6558 highs in the early evening before retracing to open this morning at 0.6543, being higher than yesterday’s open. This comes despite US Durable Goods Orders posting the largest drop in nearly 4 years, printing -6.1% m/m (exp. -4.9%, prev. -0.3%) as business investment in equipment continues to ease. CB Consumer Confidence retreated to 106.7 (exp. 114.8, prev. 110.9) after three months of consecutive increases, with concerns about the economy’s outlook, especially the labour market, and the upcoming presidential election being consumers’ primary concerns. Despite this, the USD didn’t weaken too much in the aftermath, although maintains the current downward trend. Wall St. had a mostly quiet session with the Nasdaq up +0.4%, the S&P 500 +0.1% and the Dow -0.3%. The big event tonight will be US Preliminary GDP q/q (exp. 3.3%, prev. 3.3%).
EUR
AUDEUR reached 0.6014 lows in yesterday’s early afternoon before pushing back to open this morning at 0.6033. The DAX and CAC gained +0.8% and +0.2% respectively. In a speech at the EU Parliament recently, European Central Bank President Christine Lagarde stated that ‘the current disinflationary process is expected to continue’ but that her and her colleagues will wait for more conclusive evidence that inflation is returning to target. The ECB has conveyed this argument rather convincingly as of late, which has helped to shield the euro from mounting sings of sluggish growth in Germany. The major euro event this week will be tomorrow’s German Preliminary CPI y/y print. Forecasts are for a +0.5% jump after the previous +0.2% reading.
GBP
AUDGBP opens flat at 0.5149 with the pair trading fairly sideways over the past 24h amid minimal data releases... The FTSE was also flat yesterday. MPC Member Ramsden spoke overnight, asserting his support for the more balanced outlook on risks and inflation as set out in the most recent MPC forecasts. MPC Member Mann will speak in the early hours tomorrow. We’ll also see UK Mortgage Approvals and Net Lending to Individuals m/m tomorrow evening. Overall, a quiet week for the Pound.
NZD
AUDNZD drifted higher throughout the course of yesterday, reaching 1.0630 highs around 9:30pm before retracing to open relatively flat at 1.0603. Today, the RBNZ will deliver its first policy update since November. The overwhelming consensus view is that the central bank will hold the Official Cash Rate (OCR) at 5.5%. Markets are currently pricing in an approximately 30% chance of a rate hike from the RBNZ and if there’s anyone to deliver a surprise rate hike, it’s the Kiwis. The RBNZ was the first to cut rates in response to Covid-19, the first to raise rates following the surge in inflation and signaled a pause before any other central bank in May 2023. Volatility is expected for the AUDNZD pair at midday today.