Will PCE Trigger Dovish Fed Tilt?
AUD
The Aussie Dollar continues to march higher against the majors, with global markets shedding risk, allowing the AUD to push higher. Precious metals, Gold and Silver were flat, with Crude Oil and Iron Ore closing up 0.8%, Copper finished up 2.6%, with Nat Gas being the only loser, closing down -4.3%. Asian equities were soft into the close, with the ASX closing down 0.1%, and the SHANGHAI COMP down 0.2%. The quiet week for data came to a close, with Chinese CB Leading Index m/m coming in at -0.3% from -0.5%. The highlight for the week was Australia's soft inflation report (CPI 2.1% y/y), which saw markets pricing 94% odds of a 25bps cut from the Reserve Bank of Australia in July. There is no further data to be released this week.
USD
The AUDUSD extended its gains overnight, reaching to yearly high, breaking through the 0.6550 barrier, opening this morning at a rate of 0.6547. Wall Street finished up strong, with the Dow Jones closing up 0.9%, S&P 500 up 0.8% and the NASDAQ closing up 1%. US Q1 GDP was revised down to a fall of 0.5% on weaker consumption growth, with expectations to remain at -0.2%. Meanwhile, the US trade deficit widened by $9 billion in May to $96.6 billion as exports fell over 5% and imports remained steady. U.S. Durable Goods Orders for May printed at +16.4%, almost double forecasts of an 8.5% increase with the core measure up 0.5% against forecasts of a flat result. Pending Home sales came out bullish overnight, rising to 1.8% from -6.3%, with expectations at 0.2%. Tonight, we will see Core PCE Price Index m/m coming out, expected to remain at 0.1%, with this release will help shape near-term expectations for Fed policy. The disparity between the markets' expectations for the path of monetary policy and that of Fed officials continues to fester, with markets now pricing 117bps of cuts by the end of 2026. Against this backdrop, attention will turn to tonight's Core PCE measure, being the Fed's preferred inflation gauge.
EUR
The AUDEUR pushes higher, pushing back through the 0.56 barrier earlier today, opening this morning at a rate of 0.5601. European equities were soft into the close, with the CAC closing flat, and the DAX finishing up 0.6%. ECB President Lagarde spoke last night, at the Munich Opera Festival, speaking mostly around culture, leaving markets unchanged. Tonight, we will see Spanish Flash CPI y/y set to be released, expected to remain at 2%.
GBP
The AUDGBP opens flat at 0.4769, trading sideways over the past 24 hours. British equities closed up in the red, with the FTSE down by -0.5%. Yesterday, there wasn’t much key data out besides Governor Andrew Bailey indicating at a conference that UK interest rates are likely to see a slow and measured decline. He stressed the importance of maintaining a restrictive monetary policy stance for the time being to ensure inflation durably reaches the 2% target. Although considerable strides have been made in bringing down inflation, concerns persist regarding ongoing price pressures, specifically elevated wage increases and services inflation. Looking ahead to Monday we have the Current Account which previously printed at -21.0B as well as Final GDP q/q.
NZD
The AUDNZD pair opens up a tad at 1.0802, as both economies grapple with similar challenges. Cautious market sentiment continues to keep the cross confined within a narrow trading range, with little impetus for a breakout in either direction. There is no significant economic data scheduled for release today, with the next notable event being the ANZ Business Confidence index for June, due on Monday, which will offer fresh insight into business sentiment across New Zealand.