Inflation Data Continues Aussie Dollar Gains
AUD
The Australian Dollar (AUD) strengthened across the board after the Q3 Trimmed Mean CPI printed significantly above consensus at 1.3% q/q, leading markets to fully price out any near-term RBA rate cuts. In response, the domestic ASX index fell sharply by 1%, while the region's Shanghai Composite closed up 0.7%. The market volatility was driven by yesterday's CPI data, where the quarterly figure of 1.3% significantly overshot consensus of 1.1% (up from 0.7% previously), and the annual CPI rate came in at 3.5% against expectations of 3.1% (3% prior). With no major data releases scheduled for today or tomorrow, market focus turns entirely to the next key event: the RBA rate statement next Tuesday.
USD
The AUD/USD pair pulled back, opening slightly lower at 0.6571 and losing all its recent gains after the US Federal Reserve delivered its widely anticipated 25 basis point rate cut. This moves the Federal Funds Rate target range to 3.75% - 4.00% (vs. consensus 4.00%, previous 4.00% - 4.25%). While the cut itself was priced in, the associated policy statement revealed a non-unanimous decision and Fed Chair Jerome Powell clearly insinuated that further cuts this year were not a "foregone conclusion," tempering expectations for a second immediate cut and boosting the US dollar. On the equity side, US indices closed mixed, with the S&P 500 falling by 0.4% and the tech-heavy NASDAQ climbing by 0.4%. This morning's US data further complicated the outlook, as September Pending Home Sales disappointed, printing at 0.0% MoM against a forecast of 1.6% (and a prior reading of 4.2%). Looking ahead, the US calendar is quiet until next Monday's ISM Manufacturing PMI release prior 49.1, which will provide the next major gauge of US economic health.
EUR
The AUD/EUR cross remains well-bid at 0.5664, maintaining yesterday's sharp gains in a quiet overnight session devoid of major European data releases, despite cautious European equity performance (the German DAX fell by 0.6% and the French CAC slipped by 0.2% yesterday). The primary focus for the Euro is the European Central Bank (ECB) decision tomorrow, where the Main Refinancing Rate is widely expected to be held steady at 2.15%. Traders will scrutinise the associated Monetary Policy Statement and the subsequent ECB Press Conference for any shifts in forward guidance, particularly given the fragile growth outlook. Markets will also be keenly focused on upcoming Q3 reports, including the German Preliminary GDP, which is forecasted at 0.3% QoQ, German Preliminary CPI, expected at 0.2% MoM, and the Spanish Flash CPI for the year, forecasted at 3.0% YoY, all due for release today and tomorrow.
GBP
The AUD/GBP cross opened up at 0.4980. With no major local data releases from the UK, the upward move was largely dictated by the strong Australian CPI data released yesterday. UK equities were positive, with the FTSE index closing up 0.6%. The UK economic calendar remains quiet until next Thursday's Bank of England (BoE) Monetary Policy Committee (MPC) meeting and statement.
NZD
The AUD/NZD pair opens flat at 1.1403. This move follows strong Australian CPI data from yesterday, which overshadowed the only notable release from New Zealand: RBNZ Governor Hawkesby's speech on protecting central bank independence. Given the lack of market-moving content from the RBNZ and the domestic focus on inflation anchoring, the pair continues to be driven by the hawkish re-pricing of the RBA's outlook. The New Zealand calendar remains quiet until next Wednesday, when the market will focus on the Q3 employment data, including the Employment Change QoQ prior 0.1% and the Unemployment Rate.