US Inflation Persists

AUD

The Aussie Dollar opens lower against all major currency pairs after a surprisingly hot US inflation print overnight. Asian equities closed mixed yesterday with the ASX +0.3%, Shanghai Composite -0.7% and the Nikkei -0.5%. Commodities didn’t fare to well closing mainly lower with the exception of Crude Oil which gained 1.1%. The quiet week for Aussie data continued with no data releases yesterday. Today, we will see the release of MI Inflation Expectations which previously read at 4.3%. Today’s main event be out of China as we expect the release of their CPI and PPI y/y, with CPI expected to drop from 0.7% to 0.4% and the PPI is expected to drop from -2.7% to -2.8%.
 

USD

Hot US inflation data sparked a steep drop in the AUDUSD pair overnight, having peaked at 0.6644 in yesterday's session before falling nearly 2% to 0.6498 lows ahead of this morning's open at 0.6513. Wall Street closed in the red with the Dow Jones -1.1%, S&P 500 -0.9% and NASDAQ -0.8%. The much-anticipated US CPI report for March was released with the results firmer than expected. Headline inflation rose 0.4% m/m and 3.5% y/y with core inflation up by 0.4% m/m and 3.8% y/y with all results coming in 0.1% higher than expectations. Notably, the strengthened ‘supercore’ inflation measure shows the Fed may have a real problem on its hands as this gauge tracks consumer prices omitting food, energy and housing costs. It surged to 4.8% y/y in March and surpassed an 8% annualized pace over the last three months. Markets will be closely watching tonight’s PPI releases, as Core PPI m/m is expected to drop from 0.3% to 0.2% and PPI m/m is also expected to drop from 0.6% to 0.3%. Tonight, we will also see the release of the weekly Unemployment Claims which is also expected to drop from 221K to 216K.
 

EUR

The AUDEUR drops over 40 pips last night, losing the much awaited 0.61 handle off teh back of a strong US inflation print, opening this morning at 0.6062. European equities closed mixed with the DAX +0.1% and the CAC flat. A quiet night for the Eurozone with only the Italian Retail Sales m/m which missed forecasts of 0.2%, coming in at 0.1%. However tonight, the ECB will announce its monetary policy decision, where it is widely expected that the Main Refinancing Rate will be kept on hold at 4.5%. The Governing Council is increasingly confident in inflation reaching the 2% inflation target this year, but still harbors concerns about labor cost pressures due to a tight labor market. President Lagarde previously suggested a rate cut in June rather than April, citing the need for more labor cost data.
 

GBP

Overnight, the AUDGBP experienced a notable decline, slipping below the 0.52 mark and dropping by almost half a cent from the daily highs to open this morning at 0.5192. British Equities experienced a slight uptick, with the FTSE closing 0.3% higher. A quiet day for the Brits with no data released yesterday, and only some mid-tier data to keep an eye out for tonight in the form of their BOE Credit Conditions Survey.
 

NZD

The AUDNZD experienced little movement after the Reserve Bank of New Zealand held their key interest rate yesterday, with the pair losing the 1.09 handle overnight, opening lower this morning at 1.0893. Yesterday, the Reserve Bank of New Zealand chose to maintain the Official Cash Rate at 5.50% for the sixth consecutive meeting. The RBNZ's Monetary Policy Committee noted that the economy was progressing as expected, with elevated interest rates alleviating capacity constraints and curbing inflation. According to the RBNZ, the Committee unanimously agreed to keep the Official Cash Rate unaltered as a restrictive policy position was still necessary and would allow consumer price inflation (CPI) to return to the 1% to 3% target range before the end of 2024.