USD Treads Water Ahead of Tonight's CPI
AUD
The Aussie Dollar mostly flat against majors, with global markets on hold awaiting President-Elect Trump’s inauguration next week. Locally, Westpac Consumer Sentiment showed an improvement in consumer financial confidence and the ASX closed +0.5%. Commodity prices were down, with key movers being Sugar -3.1%, Natural Gas -2.4% and Oil -1.6%. China had their monthly New Loans data released higher than expected, but with muted impact on the exchange rates. Today will be a quiet day for Australian and Chinese economic data, with the next key data piece being Australian employment data at 11:30am tomorrow.
USD
The AUDUSD opens flat at 0.6194, briefly improving in yesterday's session due to reports that Trump’s cabinet could roll out tariffs incrementally, as opposed to immediately. Last night also saw US PPI data, showing a less-than-expected increase in the cost of producer’s goods. However, this was overshadowed by the tariff reports, with the USD remaining largely stable ahead of tonight's CPI report. Wall Street was slightly down, with the Dow Jones closing +0.1%, S&P500 -0.3% and Nasdaq -0.7%. Tonight will see key US inflation data, with headline inflation expected at 2.9% y/y, up from last month's 2.7%. With the labour market remaining strong and inflation still (slightly) above the Fed's target, it's not surprising that markets are pushing out prospects of another interest rate cut from the Fed toward the latter half of the year.
EUR
The AUDEUR opens lower at 0.6010, dropping from yesterday’s highs of 0.6048 due to new economic sanctions on Russia. On equities, the DAX closed +0.7% and CAC +0.2%. No key economic data out of the Eurozone yesterday, as its been a quiet month for the Eurozone so far. Tonight will see French inflation data coming out, currently expecting to hold from last month at +0.2%. Earlier in the week, the European Central Bank's Chief Economist Lane summed up the bank's current stance: "If the economy is not growing quickly enough, we will likely undershoot our target". In other words, the ECB may need to cut interest rate by more-than-expected in 2025. Currently, markets expect 90 to 100 bps of easing this year.
GBP
The AUDGBP opens at 0.5058, continuing its improvement from New Year’s 4.5-year lows of 0.4979. The rally is largely driven by decreasing inflation in England, which is now estimated at 2.6% y/y (UK CPI set for release tonight). This will be followed up by monthly GDP data from England tomorrow, which is expected to show growth of 0.2%.
NZD
The AUDNZD opens flat at 1.1049, dropping to 1.1015 last night before climbing back to current levels. NZ Business Confidence released yesterday, showing a large increase. This signals a possible improvement in the NZ Economy, as they are currently in a technical recession due to two quarters of negative GDP growth. Tomorrow will see monthly NZ food price changes.