Fed's Preferred Inflation Gauge Tonight
AUD
The Aussie Dollar opens stronger across the board relative to Wednesday’s open after our CPI data landed higher than markets anticipated. Consumer prices increased at an annualised rate of 3.5% (prev. 3.4%), remaining outside the RBA’s target band of 2-3% p.a. The hot report is expected to test the RBA’s patience, suggesting the central bank may have more work to do to cool prices without choking economic growth. Asian equities were mixed yesterday with the Nikkei down -2.2%, and the Hang Seng and Shenzhen up +0.5% and +0.3% respectively. The ASX was closed with ANZAC day. Today we'll see Aussie PPI and Import Prices data. No notable releases ahead of Australia’s Retail Sales and China’s PMIs on Tuesday.
USD
AUDUSD reached 0.6486 lows overnight despite US GDP falling well-short of expectations, with the pair gradually climbing back to this morning’s open at 0.6522. The first quarter’s annualised growth rate of 1.6% (exp. 2.5%) confirms that the US economy is not reaccelerating to start 2024, although taking a look under the hood gives a more nuanced picture. A recent surge in US imports (a subtraction in the GDP calculation) suggests a strong domestic demand for goods, with companies also shedding inventories at a rapid rate. While the US economic data remains rock-solid, it is slowing. Wall St. closed lower with the Nasdaq -0.6%, Dow -1.0% and S&P 500 -0.4%. Tonight’s March Personal Consumption Expenditure (PCE) Price Index (the Fed’s preferred measure of inflation) is forecast to show a mixed picture of inflation trends, potentially reinforcing the Fed’s resolve to hold off on interest rate moves. Markets expect the annual figure to rise slightly on a y/y basis to +2.6% from +2.5%, while the m/m figure is expected at +0.3% (down from +0.33%). We'll also see the Revised UoM Consumer Sentiment print this evening.
EUR
AUDEUR traded a near 30 pip range over the past 2 days, having experienced a +0.5% increase after Wednesday’s inflation print from Australia, only to give it up after the soft US GDP release led to Euro demand. The pair opens this morning at 0.6079. The DAX ad CAC each gave up -0.9% in yesterday’s session. We’ve seen no major Eurozone data recently, with little happening ahead of Monday’s Preliminary CPI release for Germany. In terms of monetary policy, markets still appear comfortable with 75 bps of easing from the European Central Bank by year-end, with ECB Members seemingly converging around this view. Even Member Nagel, a renowned hawk, recently reiterated that it may be appropriate to cut interest rates as inflation continues to fall.
GBP
AUDGBP initially reached 0.5236 after Wednesday’s stronger-than-expected Aussie inflation print, before gradually falling over the past 2 days to this morning’s open at 0.5212. The FTSE gained +0.5% in yesterday’s session. This morning's GfK Consumer Confidence printed near expectations at -19. Next week will be a quiet one in terms of hard-hitting UK data prints.
NZD
AUDNZD traded relatively sideways over the past 2 days, having seen an initial +0.5% rise off the back of Wednesday’s hot CPI release from Australia. The pair open this morning at 1.0948 with no data set for the remainder of the week (there were only 2 low-tier releases this week). Next week will be a busy one for the Kiwis with their employment report, ANZ Business Confidence release and RBNZ Governor Orr due to speak.