PCE Inflation Eyed as Fed Approaches Cuts

AUD

The Aussie Dollar opens higher across the board against the major’s, maintaining momentum despite some lower Private Capital Expenditure data and minor declines in commodity prices yesterday. Aus Private Capital Expenditure fell -2.2% in the past quarter, missing expectations of a +0.9% increase. Asian equities finished the day mixed, with the Nikkei flat, Hang Seng +0.5%, and Shenzhen -0.3%. The ASX also closed slightly lower at -0.3% as energy and consumer discretionary weighed in the index. Commodities followed with Gold -0.2%, Silver -0.4%, Iron Ore -0.1% and Copper -0.2%. In local news, Retail Sales for July are due at 11:30am and we may start to see some support from the stage 3 tax cuts that were implemented, although a material pick-up is unlikely as it is forecasted at +0.3% from last month’s +0.5% due to the fact that many workers would not have started to receive the tax cuts until part-way through the month. Tomorrow, there will be some major data out of China with their Manufacturing and Non-Manufacturing PMIs to look out for. China's manufacturing sector is expected to have remained in slight contractionary territory (45.5), with the non-manufacturing sector expected on the cusp of expansion and contraction at 50.0.
 

USD

The AUDUSD coupling opens higher this morning at 0.6797, maintaining recent gains from investor bets of imminent US rate cuts, despite stronger performing US data overnight with Prelim GDP q/q coming through at 3% from the forecasted 2.8%. Wall St. closed mixed into the close with the Dow Jones trading +0.6%, the S&P 500 flat, and the Nasdaq -0.2%. Later this evening there will be some major data released with the Core Personal Consumption Expenditure (PCE Price Index which excludes food and energy prices), being the Fed’s preferred measure of underlying inflation, forecasted at +0.2% for the second straight month. That would pull the three-month annualized rate of so-called core inflation down to 2.1%, a smidgen above the central bank’s 2% goal. The key monthly inflation figure is likely to shape market expectations surrounding the sizing of the Fed's imminent interest rate cut, with Fed Chair Powell recently declaring 'the time has come' for monetary policy to change, with the direction being clear. Chicago PMI is also set for release at 11:45pm forecasted to decrease from 45.3 to 45.0, and at midnight Revised UoM Consumer Sentiment set to increase from 67.8 to 68.0.
 

EUR

AUDEUR opens higher this morning at 0.6134 after German Prelim CPI m/n came through lower than forecasted at -0.1% and Spanish Fly CPI y/y also came through lower at 2.2% from the forecasted 2.4%. Eurozone equities closed in the green with DAX and CAC up 0.7% and 0.8% respectively. Looking at Eurozone news later this evening there will be the CPI Flash Estimate y/y expected at 2.2% which would represent a significant drop from last month's 2.6% figure. Partially this is due to base effects as a large energy cost increase from last year will roll off. The core rate, which excludes more volatile elements, is expected to remain relatively high but continue downward to 2.8% from 2.9% prior, which could leave the door open for a potential rate cut in September after the ECB kept rates unchanged at the most recent meeting.
 

GBP

The AUDGBP opens higher at 0.5162, retracing from 0.5172 highs early this morning after what was a quiet news day yesterday. UK equities closed in the green with the FTSE +0.4%. There will be a few bits of minor data being released out of the UK today with Nationwide HPI m/m, M4 Money Supply m/m, Mortgage Approvals, and Net Lending to Individuals m/m.
 

NZD

The AUDNZD opens flat this morning at 1.0853, having fully recovered from yesterday's -0.5% fall when ANZ Business Confidence printed at decade highs of 50.6. The pair initially fell to 10-week lows of 1.0798 before recovering. The survey’s headline measure showed a net 50.6% of respondents expected the economy to improve over the year ahead, with the RBNZ's recent interest rate cut playing a key role in the shift in sentiment. Earlier this morning, NZ Building Consents m/m also jumped from previous -17.0% to +26.2%, ending the day for news from our Kiwi neighbors.