Spotlight on Aussie Wage Data

AUD

The Aussie Dollar opens slightly higher against most majors, flat against the Euro, driven by improving global risk sentiment which saw highs from the ASX, as well as positive performance among commodities. The ASX closed +0.5%, driven by info tech and consumer discretionary. Asian equities also kicked off the week mostly stronger, Nikkei +0.6%, Hang Seng +0.1%, and Shenzhen -0.2%. Commodities were mostly up, with Crude Oi +3.7%, Nat Gas -1.9% and Copper +1.9%, Gold & Silver each +0.3%. Yesterday, RBA Deputy Gov Hauser spoke at the Economic Society of Australia Business Lunch, but markets had a muted response. Today, we will see Australia's Wage Price Index q/q at 11:30am - currently expected to increase +0.9% in the previous quarter. While public sector wages may have picked up from the weak figure in Q1, private sector wage growth is likely to have remained steady. A weaker headline figure will slightly ease the RBA's inflation concerns & add to the argument for an interest rate cut in 2024. Chinese New Loans are also expected to be released sometime today, with markets believing that New Loans are half of the previous month’s at 1280B. Both data releases are indicators of inflation and volatility can be expected if either data releases misses their expected results.
 

USD

The AUDUSD opens higher at 0.6587, breaking the 0.66 handle last night before slightly retracing to the current levels. Wall Street closed mixed, with Nasdaq +0.2%, S&P 500 flat and Dow Jones -0.4%. Last night, Cleveland Fed Inflation Expectations and the Federal Budget Balance were released, albeit with an insignificant impact on currency markets. Tonight, we will see American Core PPI m/m and PPI m/m released, with both expected to be at 0.2%. A 0.2% rise in the Core figure would allow the y/y rate to fall to 2.6% from 3.0%. That would represent the first slowing in the y/y rate so far this year, indicating the Fed's fight against inflation is drawing closer to an end. The data will be following by US Consumer Price Inflation (CPI) late tomorrow evening.
 

EUR

The AUDEUR opens higher at 0.6024, reaching 0.6044 highs last night before falling and trading sideways to current levels this morning. The DAX also flat and CAC ended the session -0.3%. Yesterday, German WPI m/m was released slightly higher than expected at 0.3% vs 0.2%. Today will see German and Eurozone ZEW Economic Sentiment released, although this week overall should be a quiet week for the Euro, as only low-level data will be released which usually doesn’t produce major volatility. 
 

GBP

The AUDGBP opens higher at 0.5159, reaching 0.5175 highs last night before stabilising at the current level. The FTSE closed higher at +0.5%. This afternoon will bring the important UK labour report, with the Claimant Count Change, Average Earnings Index 3m/y and Unemployment Rate set for release at 4pm. The currency pair can expect to see high volatility if the data misses expectations, as the labour market is a strong indicator of the economic situation in Britain. At the beginning of the moth, the BOE cut their key interest rate, with only 5 in 9 Members voting in favour of the decision. Notably, BOE Governor Bailey and BOE Chief Economist Pill were at odds with regards to the decision. Today's report is particularly important as it will likely drive expectations surrounding the next Bank of England interest rate move (or hold). Tomorrow will also bring the important CPI y/y, which is expected to increase to 2.3% from 2.0%.
 

NZD

The AUDNZD opens higher at 1.0932, trending lower overnight as markets wait for the RBNZ Official Cash Rate decision at midday tomorrow. AUDNZD volatility is expected in the aftermath of the decision, with markets currently implying a 57% chance of a cut from the central bank tomorrow. On the other hand, 12 out of 21 economists surveyed by Bloomberg expect an interest rate hold at 5.5%. This means that regardless of the decision, a large number of market participants will be somewhat surprised, adding to the case for currency volatility. The RBNZ Rate Statement & Press Conference could also shed light on future monetary policy decisions.