Aus CPI to Settle Rate Hike Debate
AUD
The Aussie Dollar remains soft against all other major currencies even though there are expectations that the RBA will be one of the last G10 countries to cut rates with some expectations of a possible rate hike at next week's meeting. Asian equities were mixed with the Shanghai Comp -0.4%, Nikkei +0.1% and the ASX -0.5%, weighed on by a -1.9% underperformance in materials. Commodities were mostly up with Gold +0.4%, Silver +0.6%, Iron Ore +0.9%, Copper +0.2% and Crude Oil -0.9%. Today is a big day for the AUD with inflation data coming out at 11:30am. The annual figure is expected to print at 3.8% compared with last month’s 4%, while the quarterly figure is expected to remain at 1.0%. Where these figures actually land will play a big role in determining the RBA's next course of inflationary action. Where they print relative to expectations will also have immediate influence on the strength, or weakness, of the AUD. Domestic Retail Sales are also expected to come in at 0.2% compared to last month’s 0.6%. Since July 12, the AUD has lost almost 3.5% against the USD, making it one of the weaker G10 currencies, despite the expectations that the RBA will be one of the last to cut rates. A lot of this is due to the weak economic situation in China. Chinese Manufacturing PMI is coming out today and is expected to come in at 49.3 compared with a previous measure of 49.5. Anything lower than expectations could put further downward pressure on the Aussie. Tomorrow Australia has Balance of Trade figures with expectation of $5B compared to $5.77B previously.
USD
The AUDUSD remained flat and traded in the 0.6529/625 range yesterday and now sitting at 0.6540. Wall St was a little mixed in early trade with the DOW holding modest gains through the S&P and Nasdaq fell slightly and moved to losses of 0.5% and 0.1% respectively. Overnight we saw US Job Openings which came in at 8.184m compared with expectations of 8m. Market sentiment favours risky assets on expectations that the Fed will deliver dovish guidance on interest rates, expecting them to hold the Federal Funds Rate at 5.5% at the central bank's meeting in tomorrow's early hours. At this point in time, markets are confidently pricing in an interest rate cut at the September meeting, although commentary from Fed Chair Powell overnight could bring about volatility. We'll also get insight into the US labour market overnight, with important ADP Non-Farm Employment Change and Employment Cost Index q/q figures.
EUR
AUDEUR traded horizontally and is currently sitting at 0.6047, being a little lower than yesterday's open. There were a couple pieces of data that came out of the EU yesterday with EA GDP Growth Rate Flash figures coming with YoY at 0.6% compared with expectations of 0.5% so not a huge change there. European equities opened mostly stronger with Stoxx +0.6%, CAD +0.4% and DAX +0.3%. Today we have EA Flash Inflation figures coming out with EA Inflation Rate YoY Flash expected to come in at 2.4% compared with previous figure of 2.5%. Tomorrow, we have EA PMI figures (expectation 45.6, previous 45.8) as well as EA unemployment rate which is expected to stay the same at 6.4% so big day for the EU tomorrow. Expect some volatility if these figures don’t come out as expected.
GBP
AUDGBP traded relatively flat amid quiet trading conditions & lack of economic data yesterday, opening today at 0.5093. The FTSE was weaker at -0.5%. There was no data yesterday out of the UK and no data coming out today. All eyes will be on the UK with the Bank of England making their interest rate decision where they are expected to cut from 5.25% to 5%. This however is in the ‘balance’ as some policymakers acknowledge that they need to remain vigilant about persistent inflationary pressures. The lack of certainty around what the BoE will do is likely to bring some volatility for the AUDGBP pair.
NZD
The AUDNZD traded between 1.1077 and 1.1148 yesterday and is currently sitting at 1.1076, being fairly flat on yesterday's open. There was no news out of NZ yesterday however this morning we had the Building Permits MoM figures come out at 13.8% compared with a previous figure of -1.9%. This is the sharpest drop since Feb 2021. We also have ANZ Business Confidence coming out late this morning.