AUD Undeterred by Warm CPI Print
AUD
Despite some stronger local CPI figures, the Aussie Dollar fails to capitalise as commodities fall and risk sentiment sullies, opening this morning either lower or flat against the majors. Asian equities ended yesterday’s session mixed with the ASX -1.3%, Nikkei -0.8% and Shanghai Comp flat. Commodities finished yesterday’s session mainly lower with Crude Oil -1%, Gold -0.2%, Silver -0.7%, Iron Ore -0.2%, Copper -1.6% and the standalone finishing in the green was Natural Gas closing 1% higher. Yesterday’s Aussie CPI figures comfortably beat expectations of 3.4%, coming in at 3.6% reaffirming that rate cuts remain some way off. The RBA is likely to delay rate cuts and maintain a tightening bias. However, rate hikes are unlikely to be back on the table. Quarterly inflation print due on July 31 is more important in determining the RBA’s path. Looking to the day ahead we will only observe two low tier releases locally in the form of Building Approvals m/m and Private Capital Expenditure q/q, both unlikely to impact markets.
USD
AUDUSD inches lower to 0.6612 after the US Fed released the Beige Book to indicate a more pessimistic outlook with prices increasing at a modest pace. The Beige Book also noted expanding economic activity in the US though varied across different industries and districts to drive rising uncertainty and downside risks. Yesterday, US manufacturing figures were also released to show stronger conditions from the previous month, with the Richmond Manufacturing Index rising to 0 from -7. Wall Street also saw a red day with the Dow Jones -1.1%, S&P 500 -0.7% and NASDAQ -0.6%. Onward looking we have US Preliminary GDP q/q tonight, expected to decrease to 1.2% from a previous 1.6%, as well as Unemployment Claims which is expected to remain relatively flat, adding just 3K to be expected at 218K. Both will be released at 10:30pm tonight.
EUR
The AUDEUR rate opens this morning relatively flat despite a whipsaw of volatility in the afternoon off the back of the Aussie CPI release, opening this morning at 0.6122. European equities took a beating, with the DAX closing down 1.1% and the CAC down 1.5%. Yesterday we had the German Prelim CPI m/m released lower at 0.1%, expected to drop from 0.5% to 0.3%. This is the lowest result that has been recorded in the past 5 months, with the German economy being the largest in the union, these results will give solace to the ECB’s firm stance on rate cuts later this year. Looking forward, at 5pm today we have the Spanish Flash CPI y/y, which is expected to increase from 3.3% to 3.7%.
GBP
AUDGBP opens at 0.5207, being in line with yesterday morning, with the pair trading sideways over the past 24h. The FTSE ended yesterday -0.9%. After a heavy-hitting data dump last week, which saw UK consumer price inflation fall significantly, albeit by less than expectations, the UK has entered another quiet period. There’s no data out today and only low-tier releases tomorrow evening.
NZD
AUDNZD reached 1-week highs of 1.0848 yesterday afternoon before falling off to 2-month lows of 1.0802 earlier this morning. The rate opens at 1.0818. Yesterday’s ANZ Business Confidence index printed at 11.2, falling nearly 4 points in May as Kiwi firms, particularly in the services sector, feel the strain of tighter monetary policy. No data set for release today. Tomorrow, we’ll see the first budget from the National-ACT-New Zealand First coalition government. Finance Minister Willis has confirmed the budget will introduce ‘meaningful but modest’ tax relief, although some economists remain concerned that tax cuts will fuel near-term inflation.