Impending Rate Decision Pressures NZD

AUD

The AUD opens mixed against majors ahead of today's domestic consumer inflation print. Headline CPI is expected at 2.3% y/y, down a tad from last month's 2.4%. Due to volatility in the monthly indicator, and the fact that this release will exclude many services prices (being the first month of the current quarter), the data are unlikely to receive significant attention from the market or the RBA. Even so, if the actual figure lands far from expectations, currency volatility is expected. Yesterday, Asian equities ended the session mixed with the Shenzhen -0.5%, Nikkei +0.5% and Hang Seng +0.4%. The ASX 200 climbed +0.6% as IT and financials outperformed, both over +1.1%. On Friday, we'll see Australian Retail Sales data.
 

USD

AUDUSD has fallen -1.4% since Monday's 6-month highs of 0.6537, kicking off this morning at 0.6445 with the AUD under pressure as investors adopt a risk-off stance in response to mounting global economic and trade uncertainties. A positive night on Wall St. following the Memorial Day long weekend saw the Nasdaq close +2.5%, the S&P 500 +2.1% and the Dow Jones +1.8%. The USD also strengthened after stronger-than-expected Durable Goods Orders data overnight (-6.3% y/y vs -7.6% expectations). The US has a busy economic calendar in the last week of May. The FOMC Meeting Minutes will be released this evening. Later in the week, we'll see Prelim GDP, Unemployment Claims and the Core PCE Price Index (The Fed's preferred inflation gauge).
 

EUR

AUDEUR opens flat at 0.5686, touching 0.5697 highs in the late morning yesterday before falling off to 1-week lows of 0.5672 this morning, then reverting to current levels. The DAX gained +0.8% and the CAC closed flat. The German GfK Consumer Climate printed on-expectations at -19.9 as the consumer climate continues its recovery in parts (rising economic and income expectations, falling willingness to spend). We'll see low-tier Eurozone data this evening. The next major release will be German Prelim CPI, on Friday.
 

GBP

AUDGBP opens flat at 0.4771, with the pair falling -2.2% over the past fortnight as global trade uncertainties weigh on the AUD. Yesterday, the FTSE gained +0.7%. Overnight, CBI Realised Sales printed at -27, with retail sentiment falling at the sharpest rate in five years. Against a backdrop of subdued demand, retailers plan to reduce investment and headcount. There'll be no UK economic data for the remainder of the week. On Friday afternoon, Bank of England Governor Bailey is due to speak.
 

NZD

AUDNZD opens a little higher at 1.0832, with both currencies unable to sustain recent gains as markets focus on today's policy meeting from the Reserve Bank of New Zealand. The RBNZ is widely expected to cut the Official Cash Rate by 25bps to 3.25%, though uncertainty remains about where rates will bottom. In the absence of a shock outcome today, the NZD will likely be driven by the bank's updated forecasts, especially its outlook for the cash rate.