AUD Edges Higher on Inflation Surprise
AUD
The Aussie Dollar opens higher across the board, with Australian consumer inflation data released a little higher than expectations, although a key measure of core inflation remained steady enough to keep the door open to an interest rate cut next month. The headline Consumer Price Index rose 0.9% in Q1, just above forecasts of 0.8% and leaving the annual pace steady at 2.4%. The Trimmed Mean measure of core inflation (the RBA's preferred inflation gauge) rose 0.7%, up from 0.5% in Q4 2024. The annual Trimmed Mean measure now sits at 2.9%, being the first time since Q4 2021 inside the RBA’s target band of 2 per cent to 3 percent. This economic news suggests the RBA is likely to reduce the cash rate for the second time this year at their next meeting on May 20th (markets currently expect a 25bps cut in May and a full percent point-worth of cuts by the November meeting). Asian equities continued higher on Wednesday, the Nikkei up +0.6% after its break, the Hang Seng +0.5% and the Shenzhen -0.1%. The ASX climbed +0.7% led by IT and real estate stocks. Commodities on the other hand closed all in the red with Gold -0.7%, Silver -0.1%, Iron Ore -0.8%, and Copper -5.4%. Nothing major set for release domestically with the Goods Trade Balance, and Import Prices q/q later this morning, followed by Commodity Prices y/y later this afternoon.
USD
The AUDUSD opens higher at 0.6412 after higher Aussie inflation strengthened the AUD, while an abundance of weaker employment and GDP data from America weakened the USD. The US economy experienced a slight contraction in the first quarter, with GDP decreasing by 0.3% annually. This marks the first decline since 2022 and was a larger drop than anticipated. However, the primary reason for this downturn appears to be a significant increase in imports just before new tariffs took effect in April. Furthermore, ADP Non-Farm Employment Change printed at 62K, missing expectations of 114K. A relatively benign session on Wall St. saw the Dow Jones close +0.4%, the S&P 500 +0.1%, and the Nasdaq -0.1%. Looking forward we have President Trump speaking again this morning at the Cuomo Town Hall in New York. In terms of data, we have Unemployment claims which are expected to print at 224K, in line with previous readings. We'll also see the ISM Manufacturing PMI with economists expecting a slight contraction to a reading of 48.0.
EUR
Higher Aussie inflation sees AUDEUR open stronger at 0.5662, falling below the 0.5600 handle last night temporarily before rising to current levels. Yesterday, there was a flurry of low-level economic data released out of France, Germany and Italy which beat expectations overall. Additionally, German Prelim CPI m/m released at 0.4% (exp. 0.3%), showing signs that the interest rate cuts by the ECB were stimulating the economy. European equities were up with the DAX +0.3% and the CAC +0.5%. Today is a bank holiday for the Eurozone (May Day), with no data being released in the next 24 hours.
GBP
The AUDGBP climbed gradually over the past 24 hours, with the pair reclaiming the 0.48 barrier, opening this morning at a rate of 0.4813. British equities saw mild gains into the close, with the FTSE finishing up +0.4%. Nationwide HPI m/m came in lower at -0.6%, expected at -0.1% from 0%. Tonight will bring the Final Manufacturing PMI, expected to remain at 44, showing the poor industry in the Isles.
NZD
The AUDNZD opens the day higher, hitting a 2-week high overnight, briefly breaking through the 1.08 barrier overnight, opening this morning at a rate of 1.0797. ANZ Business Confidence slumped to 49.3 from the previous 57.5. This means 49.3% of respondents expect an improvement in business conditions in the year ahead, with confidence taking a tumble as US-China tariffs cause chaos. There is no news set to be released today, with the rest of the week being quiet.