Could US CPI Determine Fed's Path?
AUD
The Aussie Dollar opens either flat or lower against the majors this morning with commodities sharing a similar fate, seeing Crude Oil down 3.6%, Nat Gas down 6%, Copper down 0.9%, Iron Ore flat, Gold up 0.1% and Silver up 0.5%. Asian equities had a small win yesterday, with both the ASX and the Shanghai Comp closing up 0.3%. Locally, NAB Business Confidence came out lower at -4, previously at 1 and Westpac Consumer Sentiment fell -0.5% to 84.6. Consumer pessimism that has dominated for the past 2 years is still showing no real signs of lifting, however, the focus looks to be moving from cost-of-living pressures (which are becoming a little less intense) to concerns surrounding where the economy may be headed and what this could mean for the jobs market. The rest of the week is quiet on the data front, with the Chinese New Loans tentatively set for release over the next few days, expecting a large increase from 260B to 810B. This bump in loans could show that there is the growth needed, with Monday’s poor CPI result feeding concerns that China needs to start to stimulate growth amid deflationary pressures.
USD
The AUDUSD opens flat, with the pair maintaining a tight range all day yesterday, opening this morning at 0.6655. Wall Street saw a mixed performance, with the Dow Jones closing down 0.2%, S&P 500 up 0.4% and the NASDAQ up 0.8%. Yesterday was a quiet day, with NFIB Small Business Index coming lower at 91.2 from 93.7. Tonight, we have inflation out from the States, with the CPI m/m and the Core CPI m/m both expected to remain at 0.2%, with annual inflation expected at 2.5%, lower than the previous 2.9%. The market is currently pricing in a 25% probability for a 50bps rate cut on September 18, and a downside inflation surprise would most likely prop-up these expectations. On the flip side, an unsurprising release or slight pick-up in inflationary pressures likely won’t impact the Fed rate move expectations but could, on the margin, curtail the dovish commentary accompanying the much-expected 25 bps cut next week. Either way, as the last major economic release ahead of next week's Fed meeting, tonight's CPI report may well decide which path the central bank takes.
EUR
The AUDEUR pair opens the day flat, with an unremarkable trading day yesterday, opening this morning at a rate of 0.6037. European equities saw some downside yesterday, with the DAX closing down 1% and the CAC down 0.2%. It was a quiet day yesterday, with the German Final CPI m/m coming in as expected at -0.1%. New major news tonight. Tomorrow evening will bring the main Euro event for the month - Being the European Central Bank interest rate decision & Press Conference. Markets are expecting a 25bps cut from 4.25% with the volatility to be seen by the following Monetary Policy Statement and ECB Press Conference. They seek to answer what the ECB’s plan is moving forward, with markets currently pricing in a 40% of another 25bps cut before the end of year.
GBP
The AUDGBP opens a little lower today, with a lack a movement seen throughout yesterday, opening this morning at 0.5083. British equities closed in the red with the FTSE down 0.8%. Yesterday, we saw mixed unemployment data released, with the Claimant Count Change coming in much lower at 23.7K, with expectations of a from 102.3K to 95.5k. Average Earnings Index 3m/y dropped from 4.6% to 4%, expected at 4.1%. although wages grew at a slower rate, there is a large drop in people claiming unemployment benefits, showing a much stronger labour market, giving the BOE time to be more gradual with their cutting cycle. Today at 4pm we have their GDP m/m to be released, expected to grow +0.2% after a flat reading last month.
NZD
The AUDNZD took a small decline since yesterday, slumping during the day session and unable to fully recover overnight, opening this morning at 1.0817. Yesterday saw no news released, with this morning having Visitor Arrivals m/m released at 2.2% previously at 0.5%. There is no further data to be released today and no crucial data until next Thursday’s GDP q/q.