US Stagflation Fears Rise Ahead of Tariff Hit

AUD

The AUD opens lower against majors with risk sentiment taking a hit after Friday's elevated US inflation report prompted stagflation fears. Asian equities ended the week weaker, Nikkei -1.8%, Hang Seng -0.7%, and Shenzhen -0.4%. The ASX 200 fared better +0.2%. Local commodities were down across the board with Crude Oil being the biggest mover at -1.1%. To local data, a quiet weekend for the Aussie, MI Inflation Gauge m/m out today (previously -0.2%) and Private Sector Credit. Out of China today, we'll see the Manufacturing PMI (previously 50.2, expected 50.4) and Non-Manufacturing PMI (previously 50.4, expected at 50.5). Tomorrow, we have the RBA Cash Rate decision, expected to hold at 4.1%, Rate Statement and RBA Press Conference.
 

USD

AUDUSD trends downward from Friday’s recovery to open at 0.6277. This comes after the USD strengthened off the Core PCE inflation report (+0.4% m/m, prev. +0.3% m/m). Hot inflation and cooling consumer spending are trends that may be intensified by Trump's aggressive moves on tariffs and government spending cuts. Stagflation fears are rising and will constrain the Fed's ability to cut rates further. US equities ended Friday lower across the board, with the S&P 500 -2%, NASDAQ -2.7% and Dow Jones -1.7%. A quiet Monday for the US, with no data out for the beginning of the week.
 

EUR

AUDEUR reached 0.5846 highs on Friday evening before falling off over 0.75% on US stagflation fears to kick off the week at 0.5802. European equities followed suit to finish lower, CAC -0.4%, DAX -0.7%. A busy afternoon in the Eurozone, German Retail Sales m/m expected flat and German Import Prices m/m too expected flat. Most importantly, German Prelim CPI m/m expected at 0.3%, previously at 0.4%. Flash CPI Data out tomorrow with ECB President Lagarde due to speak tomorrow evening.
 

GBP

AUDGBP takes a minor dip from Friday to open relatively flat at 0.4854. The FTSE opened at -0.1%. A no-news weekend and a quiet Monday for the Sterling. Minor M4 Money Supply m/m, Mortgage Approvals and Net Lending to Individuals m/m all out this evening and key data points this week would be the Construction PMI on Thursday, previously 44.6, and forecasted at 46.5.
 

NZD

AUDNZD strengthening since Thursday, touching 2-week highs of 1.1011 this morning before taking a small step back to open at 1.1006. We'll see the ANZ Business Confidence report later this morning.