RBNZ Flags A November Interest Rate Cut

AUD

The Aussie Dollar opens with mixed performance against the major, supported in part by Commodities which had a better day yesterday; Gold closing up 0.3%, Silver flat, Iron Ore up 1.1% and Copper up 0.7%. Asian Equities had a poor showing, with the ASX closing down 0.2% and SHANGHAI COMP closing down 0.7%. Yesterday saw the release of the Chinese Inflation data, with CPI y/y coming in lower at 0.2%, dissapointing against expectations of an increase from 0.3% to 0.4%. PPI y/y (Producer Price Index) came in as expected at -0.8%, previously at -1.4%. This softer than expected inflation is adding the the trend of weak inflation within China that has been observed in the past 6 months, bolstering the case for rate cuts in China to help the spur growth in the economy which has failed to fire since the depths of the severe Covid lockdowns. In what is the last minor piece of local data for the week, today we have MI Inflation Expectations, however AUD direction will be dictated by offshore events leading into the weekend.

USD

The AUDUSD has edged higher, with the pair keeping within a right range in the past 24 hours, opening this morning at 0.6749. Wallstreet was a strong performer yesterday, with DOW JONES closing up 1.1%, S&P500 up 1% and NASDAQ up 1.2%. Last night Fed Chair Powell testified for the second night in a row, stating that be believes inflation is receding, but does not have the confidence yet to declare that it is moving sustainably down to the 2% target. He stated that he would require further good data before he would be confident, which avoided capitulation in USD strength. One gets the feel markets are eager to reprice USD yields as soon as the Fed gives the green light to impending rate cuts. Tonight, the US is releasing important inflation data, with the Core CPI m/m figure expected to remain unchanged at 0.2%, CPI m/m is expected to increase from 0.0% to 0.1% and the yeary figure is expected to drop from 3.3% to 3.1%. Despite these readings not being the Fed's preferred method of tracking inflation, any decrease in inflation would be welcome and may provide some of the  the "good data" the Fed is looking for to build the case for rate cuts.

EUR

The AUDEUR opens the day flat, with the pair having a lacklustre trading day, opening this morning at 0.6231. European equities finished the day in the green, with both the DAX and CAC closing up 0.9%. Last night Italian Industrial Production m/m came out higher at 0.5%, expected at 0% form -1%. Tonight, the quiet week continues, with German Final CPI m/m being released, expected to remain unchanged at 0.1%.

GBP

Last night the AUDGBP fell to 1-week lows before opening this morning slightly higher at 0.5252. The British equities finished the day well, with the FTSE closing up 0.7%. Overnight the BOE commentary was considered less dovish than expected with the question over rate cuts being “when not if” but the absence of a timeline allowed the GBP to drive AUD lower. This afternoon we get some important data in the form of GDP m/m with forecasts of an increase from 0.0% to 0.2%. 

NZD

The AUDNZD added to yesterday's post-RBNZ gains, to near 2 year highs and opening this morning at 1.1092. Yesterday at midday the RBNZ Official Cash Rate was released, coming in unchanged at 5.50%, as expected. The RBNZ Rate Statement followed and had a surprise dovish tilt, saying that rate cuts will be brought forward into this year, previously sitting in Q1 2025 and now expected in November. As one would expect, NZD weakened across the board in the aftermath. There is no further important data out of NZ for the rest of the week.