Aussie Dollar Awaits Fate of CPI Data
AUD
The Aussie Dollar opens higher against the major currencies, extending gains for the third consecutive day due to improving risk sentiment in markets. A meeting between US President Trump and Chinese President Xi Jinping yielded significant inroads into a trade deal, with the general consensus being that large scale tariffs on China will not be placed. However, Asian equites saw a slight rebound and closed slightly down, with the ASX -0.5%, Shanghai Comp -0.2% and Nikkei -0.6%. Commodities were mixed, with the largest movers Crude Oil -2.3%, Nat Gas +1.0% and Cotton +0.8%. Today will have Aussie inflation figures releasing at 11:30am, with current expectations of a large increase in CPI from last quarter (1.1% from 0.7%). RBA Governor Bullock also mentioned that if inflation figures released as expected, then a rate cut in the next RBA meeting was off the table. No more economic data will be released until Friday 12:30pm, with Chinese PMIs released.
USD
The AUDUSD opens at 0.6583, reaching current 3-week highs due to reduced trade war fears between America and China. Wall Street continued its gains in last night’s close, with the Dow Jones +0.6%, S&P500 +0.4% and NASDAQ +1.1%. Overnight we saw the Richmond Manufacturing Index and CB Consumer Confidence release above expectations, indicating improved confidence in the American economy. Tonight will have the US Federal Reserve Interest Rate Decision, with current expectations of an almost certain rate cut to 4.0%. All eyes will be on the associated statement, as markets are unsure if this cutting cycle will continue. No more data expected to be released this week, as the US Government continues their shutdown at Day 28.
EUR
The AUDEUR opens at 0.5650, reaching 2-week highs due to Aussie Dollar strength and improved risk sentiment. No data was released yesterday from the Eurozone, but the DAX and CAC closed -0.1% and -0.3% respectively, losing strength due to American equity gains. No major data is expected to be released today, however tomorrow will have German, Spanish and French economic figures. These figures will most likely have a muted impact as the Eurozone Central Bank has their rate decision tonight. ECB President Lagarde has mentioned that they would hold interest rates at 2.15%, however the related statement and press conference will assist markets in understanding their future outlook. Further data expected on Friday night, but a majority of the volatility will be based on AUD movement.
GBP
The AUDGBP opens at 0.4960, reaching 8-month highs thanks to AUD strength and a struggling British economy. It’s currently a quiet period for UK data, however food inflation and house price inflation showed that the British economy was cooling. This has led markets to believe that a rate cut from the Bank of England is more likely, with a current market probability of 33%. On equities, the FTSE closed +0.4%. Some minor economic data will be released tonight, but a majority of the movement from the currency pair will be due to Aussie Dollar movement.
NZD
The AUDNZD opens at 1.1391, reaching 2-week highs after starting the week at 1.1315. No economic news from New Zealand since their bank holiday on Monday (Labor Day), but RBNZ Gov Hawkesby is speaking at 2:30pm, discussing the role of centrals banks. Markets may use her talking points as a hook on RBNZ’s future outlook.