China's Deflation Deepens as Trade War Bites
AUD
The Australian Dollar starts the week off higher against most majors with commodities performing largely well in Friday's session. As markets expected, China’s factory-gate prices posted the steepest drop in six months in April (-2.7% y/y) while CPI fell for a third month (-0.1% y/y), underlining the need for more stimulus as policymakers grapple with the economic toll from a trade war with the United States. Asian equities finished mostly higher to end the week, the Nikkei +1.6%, the Hang Seng +0.4% and the Shenzhen -0.2%. The ASX gained +0.5% with gains in IT & financials partially offset by losses amongst the miners. Commodities on the other hand closed in the green with Gold and Silver up 0.4%, and 0.7% respectively, while Iron Ore +0.5%, and Copper +1.1%. No news domestically today, with the next major piece being our Wage Price Index q/q set for release this Wednesday, followed by more employment data on Thursday. We may see some news out of China today with New Loans, however, that has been set as tentative.
USD
AUDUSD starts the week higher at 0.6418, with all eyes now set on trade negotiations between Washington and Beijing which began on Saturday in Switzerland, with updates from President Trump stating that an “80% Tariff on China seems right”. US Equities closed mostly in the red with the Dow Jones -0.3%, S&P 500 -0.1%, and the NASDAQ flat. No major news out of the US overnight with only FOMC Member Kugler Speaking, the Federal Budget Balance, and Loan Officer Survey. The main focus will be tomorrow night with the US Inflation releases with Core CPI m/m, a closely watched gauge of prices paid by Americans for goods and services, excluding volatile food and energy costs, forecasted to rise to 0.3%. Headline consumer inflation is expected to remain unchanged at 2.4% y/y. Followed by Fed Chair Powell speaking, who will be giving the opening remarks at The Fed's Thomas Laubach Research Conference on Thursday. This conference is a key component of the Federal Reserve's review of its monetary policy strategy, tools, and communication.
EUR
AUDEUR opens higher to start off the week at 0.5717 after Italian Industrial Production m/m came through lower than forecast with the seasonally adjusted industrial production index increasing by only 0.1% compared with the previous month. The change of the average of the last three months with respect to the previous three months was +0.4%. Eurozone equities closed in the green with the DAX and CAC both up 0.6%. It will be another quiet week with no major releases, and only a few minor pieces spread throughout the week.
GBP
The AUDGBP coupling opens flat at 0.4835 after Bank of England Governor Bailey stated late Friday that their commitment to the 2% inflation target is unwavering. UK equities saw the FTSE close in the green up 0.3%. Some minor news set for release today and overnight with MPC Member Greene, Mann, and Taylor all set to speak, however, all eyes will be set on tomorrows employment data with Claimant Count Change set to increase from 18.7K to 22.3K, and Average Earnings Index 3m/y set to decrease.
NZD
AUDNZD opens slightly higher to start off the week at 1.0846. No news from our Kiwi neighbours today. NZ Inflation Expectations q/q will be released this Friday at 1pm with no forecasts as of yet.