US CPI Slips to 4-Year Lows
AUD
The AUD opens higher against the majors, rebounding from yesterday’s losses as the US-China trade pact lacked clear direction after the 90-day temporary reduction of tariffs. The Aussie Dollar's strength comes from improved sentiment overnight, largely driven by lower-than-expected US inflation figures. Asian equities continued to rally, with the ASX closing +0.4%, Shanghai Comp +0.2% and Nikkei +1.4%. Commodities were largely up, with Crude Oil +2.9%, Sugar +2.9% and Copper +2.1%. Yesterday saw Westpac Consumer Sentiment and NAB Business Confidence released, which showed slight improvement in the perception of the Australian economy. Today will have the quarterly Wage Price Index (exp. 0.8%) and tomorrow will have Employment Change (exp. 20.9K) and Unemployment Rate (exp. 4.1%). Employment data is a key factor ahead of the RBA’s rate decision next week, where a 25bps reduction is seen as a done deal. Today's and tomorrow's employment data could shift expectations for policy action in the July RBA meeting, where there are currently 56% odds of a 25bps cut priced in.
USD
The AUDUSD opens over 1.3% higher at 0.6471, with the US Dollar falling off a cliff due to weaker inflation data and reduced expectations of a global recession. Wall Street closed up overall, with the S&P 500 +1.0% and Nasdaq +1.8% and Dow -0.4%. Last night’s American inflation data was lower across the board with Core CPI m/m (0.2% vs exp. 0.3%), CPI m/m (0.2% vs exp. 0.3%) and CPI y/y (2.3% vs exp. 2.4%). Markets are now more confident in an interest rate cut from the US Federal Reserve in their next meeting in June. With the price hike threat from tariffs receding thanks to recent agreements and with leading housing indicators pointing to a cooling in shelter costs, there will be even more scope for further interest rate cuts from the Fed later this year. The next data pieces will be tomorrow night, with Retail Sales, employment data, PPI and Fed Chair Powell speaking.
EUR
The AUDEUR opens at 0.5786, reaching 5week highs last night of 0.5795 after softer US inflation spurred markets. On equities, the DAX and CAC both closed +0.3%, with minimal news out of Europe recently. Yesterday had German ZEW Economic Sentiment, releasing at 25.2 (exp. 10.7). This continues the market’s confidence in the German economy, post-announcement of their EUR500B fund for infrastructure and defence. No major news tomorrow, however, there will be some minor employment and inflation figures out of the Eurozone on Friday evening.
GBP
The AUDGBP opens at 0.4865, having traded between 0.4810 and 0.4881 this week. The FTSE ended yesterday flat. Yesterday saw monthly English employment data released at 4pm AEST. Both of Claimant Count Change and Average Earnings Index 3m/y released better than expected with Claimant Count (5.2K vs exp. 22.3K) and Average Earnings (5.5% vs 5.2%). Tonight will have Bank of England’s Governor Bailey speaking, as well as GDP figures released at 4pm tomorrow.
NZD
The AUDNZD flirts with the 1.09 handle, opening at 1.0901, touching 6-week highs of 1.0905 earlier this morning. The NZD saw similar gains to the AUD due to the US-China Trade talks. The next key data piece will be on Friday 1pm, with quarterly Inflation Expectations.