Tonight's US CPI to Affect Rate-Cut Expectations
AUD
The Aussie Dollar opens flat / slightly lower against majors this morning after what was a quiet news day yesterday. Commodities performed relatively well with Copper +1.0%, Iron Ore +0.3%, Silver -0.1%, and Gold +0.1%. Asian equities also saw a mixed performance with the Shanghai Comp +0.7%, Nikkei -2.2% and ASX down -1.8%, being the largest daily loss in over a year after large-scale banking and mining selloffs. This morning, we have the RBA's recently appointed Deputy Governor, Sarah Hunter, participating in a panel discussion at the AFR Business Summit in Sydney. The RBA currently has wide-open guidance that includes the potential for further interest-rate increases should inflation prove sticky, so investors will be on the lookout for clues to the RBA's latest thinking. Hunter, whose main job is to shape the forecasts that help guide the RBA's policy decisions, may reflect on soft 4Q23 GDP data and be asked about the risk of recession. We will also see NAB Business Confidence data at 11:30am, which will finish off the Aussie data releases this week. We may also see the tentative release of Chinese New Loans data.
USD
The AUDUSD coupling traded largely sideways throughout yesterday's session, having tested below the 0.66 level earlier this morning before pushing back to open at 0.6612. Wall Street closed mixed with the Dow Jones +0.1%, S&P 500 -0.1%, and the NASDAQ -0.4%. A great deal of major US data this week, kicking off this evening with CPI for February, likely shaping expectations for the Fed's monetary policy decision next week. There's been good news and bad news on the inflation front in the US lately. The headline CPI has been stubbornly stuck above 3% (tonight's expectations are also 3.1%), with the Core figure (this figure excludes volatile food and energy prices) glued closer to 4% y/y. On the other hand, the recent Core PCE figure fell to 2.8% y/y in January. The headline measure is expected to remain firm at 3.1% y/y given the increase in gasoline prices last month. Overnight, we will also have the US 10-y Bond Auction.
EUR
The AUDEUR opens flat this morning at 0.6052 after a light session in terms of local and Eurozone data releases. European equities closed in the red with the DAX -0.4%, and CAC -0.1%. Today, we have German Final CPI m/m set for release in the evening, while the ECOFIN Meetings will run throughout the day. A relatively quiet week ahead for the Euro.
GBP
The AUDGBP coupling opens flat at 0.5151 despite MPC Member Mann stated that Britain has a long way to go for inflation pressures to be consistent with the Bank of England's 2% target. To equities, the FTSE was soft on the close +0.1%. This evening, we will have some major data out of the UK with Claimant Count Change which is expected to increase from 14.1K to 20.3K, Average Earnings Index 3m/y which is expected at 5.7% (prev. 5.8%) and the Unemployment Rate which is set to remain the same at 3.8%. The Bank of England is unlikely to start cutting rates before it sees clear signs that wage pressures are cooling. Although there's been good progress (earnings growth excluding bonuses has declined from +7.9% to +6.2% y/y), there is still a long way to go.
NZD
The AUDNZD fell throughout the course of yesterday evening, bottoming out at 1.0699 before edging up to this morning's open at 1.0716. No news set for release today for our Kiwi neighbours, however, tomorrow morning they have their Food Price Index (FPI) m/m set for release.