USD Weakens as Inflation Comes Off the Boil

AUD

The Aussie dollar is up substantially this morning against most majors with a shift to risk on sentiment in the market with CPI data out of the US finally showing a slow down in inflation (see USD section below). The Asian equities saw losses in the last session with the ASX -0.5%, the Shanghai Comp -0.4%, the Nikkei -1.0%, and the Hang Seng -1.7%. No major local data for the Aussie with the MI Inflation expectations coming in slightly above expectation a 6% versus the 5.4% last time, so inflation locally not showing signs of peaking. New loans data out of China also printed at 615B Yuan for last month, versus the 800B expectation, this also was 32% below last month. Chinas M2 Money Supply y/y also printed at 11.8% versus the 12% expectation. Today we’re expecting the ANZ Job Advertisements m/m.

USD

Aussie regains the 0.66 handle against the USD overnight for the first time in seven weeks off the back of soft US inflation figures. US CPI m/m printed 0.4% below expectation of 0.6%, CPI y/y on year came in below expectation at 7.7% versus the 7.9% expectations. Core CPI m/m came in at 0.3% instead of the expected 0.5%. These inflation figures coming in below their already falling expectations indicate the Fed's previously bullish rate hikes are having the desired effect. Also out of the US last night, Unemployment Claims came in above expectation at 225K, versus 220k expectation. US equities saw large gains with the S&P 500 up 4.7%, Dow Jones up 3.2%, and NASDAQ up a massive 6.3%. The US Department of the Treasury also released their Currency Report, In this Report, Treasury reviewed and assessed the policies of major U.S. trading partners, comprising roughly 80 percent of U.S. foreign trade in goods and services, during the four quarters through June 2022. Secretary of the Treasury Janet Yellen said The global economy was already dealing with supply and demand imbalances caused by COVID-19 prior to Russia’s illegal war against Ukraine, which has increased food, fertilizer, and energy prices— further elevating global inflation and increasing food insecurity.  The US Federal Budget Balance came in at -87.8B versus the -93B expectation. The US has a Bank Holiday for Remembrance Day today and we’re expecting Prelim UoM Consumer sentiment out tomorrow, currently pegged at 59.5, and Mortgage Delinquencies out tomorrow, which has been seeing a steady decrease in the US over the past 6 months.

EUR

The Aussie opens at 0.6486 this morning against the Euro, with the same risk on sentiment helping the Aussie upward. The EURUSD also broke back past parity, sitting at 1.0209 at the time of writing. The ECB economic bulletin was also released last night, revealing the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision. Some key takeaways being “(the ECB) expects to raise interest rates further, to ensure the timely return of inflation to the ECB’s 2% medium-term inflation target. The Governing Council will base the future policy rate path on the evolving outlook for inflation and the economy, following its meeting-by-meeting approach.” Italian Industrial Production m/m came in at -1.8% this morning, worse than the expectation -1.6%. The DAX followed the US equities trend and was up a massive 3.5%, and the CAC gain 2% in the overnight session. There’s a French Bank Holiday today. In the pipeline today, we have Final German CPI m/m currently expecting 0.9%. We also have the EU economic forecasts, this report includes economic forecasts for EU member states over the next 2 years, and covers about 180 variables, and is released twice a year. German Buba President Nagel is speaking on Saturday.

GBP

The Aussie is tracking slight down against the GBP, opening at 0.5635 this morning, seeing a high of 0.5677 yesterday afternoon and a low of 0.5587 last night. Not a massive amount of data from the UK yesterday, the RICs House Price balance missed expectations drastically coming in at -2% versus the 19% increase. The FTSE gained 1.1% in the last session. Tonight, we have the UK GDP m/m being printed, currently expecting negative growth at -0.4%. Prelim GDP q/q is also printing, pegged at -0.5% growth. A litany of other data is also printing tonight, Construction output m/m, Goods Trade Balance (currently expecting plus 18.6B, verus the -19.3B last month), Industrial Production m/m, Manufacturing Production m/m, Prelim Business Investment q/q (expecting 0.6% versus last quarter’s 3.7%).

NZD

The Aussie is up against the kiwi this morning, opening at 1.0973, gaining about 70bps in the overnight session, reaching a high of 1.0989 early this morning. The Kiwi also gained massively against the US dollar overnight jumping from 0.5860 to 0.6017 in the space of 2 and a half hours. Fairly quiet few days in terms of the NZ economic calendar. This morning we had the BusinessNZ Manufacturing Index print at 49.3 versus last months 52.0, indicating a change to contraction. We also had the Food Price Index m/m print at a 0.8% increase, a larger increase than last month’s 0.4%.