Aussie Inflation Falls Within 2-3% Target Band
AUD
The Aussie Dollar hit fresh 2024 highs against the USD yesterday before falling off to open lower across the board as Aussie inflation dropped within the RBA’s target band for the first time since October 2021. The AUD was also sold off as markets were disappointed that China's recent stimulus announcements lacked a fiscal component. Yesterday’s inflation reading showed Australian CPI y/y fell -0.8% to 2.7% year-on-year (with the RBA’s target at 2-3%), although unlikely to sway the RBA’s recently hawkish stance as the drop was driven by federal and state government energy rebates, and sticky services pricing is still of concern. China’s central bank has also created recent headlines of new stimulus measures to revive their slow property market and domestic demand, with the goal of boosting their overall economic growth. Onto equities, ASX was down -0.2%, Nikkei -0.2%, and Shanghai Comp unsurprisingly continued to rise +1.2% off the back of Chinese stimulus packages. Commodities were mixed with the losers being Crude Oil -2.6%, Iron Ore -0.9%, Copper flat, Gold +0.1%, Silver +0.6% and Natural Gas boasting a +6.0% gain. Today at 11:30am the RBA Financial Stability Review will be released, with possible clues into future monetary policy.
USD
AUDUSD opens lower at 0.6822 after the US Dollar broadly strengthened in the overnight session. Some of that was angst surrounding reports of developments in the Middle East, but it also reflected disappointment that China didn't deliver any real stimulus on the fiscal side to match the monetary moves this week. Yesterday, US New Home Sales showed a fall in August to 716K (despite beating expectations), showing consumers struggling with high interest rates and home prices. US equities pulled back its strength yesterday, with Dow Jones -0.7%, S&P 500 -0.2% and NASDAQ flat. In the US there will be a number of public remarks from Fed Officials tonight, most notably Chair Powell, Bostic, Williams and Barr (all voting Members in 2024). Markets will be hoping for insight into the decision to cut 50 bps this week and the trajectory moving forward, as futures markets show expectations of another 75bps cut by the end of the year. US Final GDP q/q also to release tonight (expected to remain flat at 3.0%) as well as unemployment claims, expected to add 5K to 219K.
EUR
AUDEUR opens lower at 0.6128 after a rather uneventful day yesterday from the Eurozone, as global markets cooled down from initial boost from the rate cuts from the US Federal Reserve. Yesterday, just German Buba President Nagel spoke (Deutsche Bank’s President and ECB Voting Member), notably saying “we assume the German economy will slowly pick up some momentum again”, reinforcing the recession fears economists are seeing in Germany. European equities fell, with DAX -0.4% and CAC -0.5%. This afternoon at 4pm the German GfK Consumer Climate is set to release, expected to remain unchanged at -22 to reflect continued pessimism in consumer spending. ECB President Lagarde is also set to speak at 11:30pm, possibly providing further insight into their 25bps cut earlier this month and the path moving forward.
GBP
AUDGBP opens lower at 0.5119 with just MPC Member Greene speaking overnight, adding her thoughts into the Bank of England's recent decision to hold interest rates at 5.00%. Most notably, she added “Services inflation is stubbornly persistent”, and she believes some slack in the economy needs to open up in order to return inflation sustainably to target over the medium-term. UK equities had a slow day with FTSE -0.2%. Nothing set to release tonight, with just CBI Sales released tomorrow night to give a leading indicator into consumer spending in the UK.
NZD
AUDNZD opens higher at 1.0898 with no data released yesterday. The next set of figures out of New Zealand will be the ANZ Business Confidence set to release on Monday, after they had a large boost to highs of 50.6 last month following the RBNZ’s decision to cut their key interest rate to 5.25%.