USD Gains as CPI Reinforces Fed's Caution

AUD

The AUD is down against the USD and mostly flat against other majors. As the market reacted to the US CPI data overnight, we saw a USD-centric shift. Asian equities finished the day on a positive note, with the Hang Seng +1.6% and the Nikkei +0.5%, while the Shenzhen remained unchanged. Locally, the ASX climbed +0.7%, with technology and health care sectors leading the pack at +2.1% and +2%. Gold and Silver were unchanged. Iron Ore fell -0.3%. The main focal point this week will be the results of the Australian employment report, tomorrow morning, where we'll see the Unemployment Rate and Employment Change figures. 
 

USD

AUD/USD opens down this morning at 0.6521, falling 1% on the back of the higher-than-expected headline inflation print in the U.S. overnight. The US Dollar strengthened after the Consumer Price Index (CPI) report, as traders reassess their expectations of monetary policy easing by the Fed (44bps of Fed cuts priced in by the end of 2025 - First cut priced in for September). The CPI report also revealed that inflation rose by 0.3% on a monthly basis, which is the largest increase in five months. While the Core CPI measure was softer than expected (0.2% m/m), this was due to softer rent figures offsetting gains in other areas. Shelter costs account for about 40% of the Core CPI basket. A mixed session on Wall St. saw the Nasdaq close +0.2%, the S&P 500 -0.5%, and the Dow Jones -1%. More data is around the corner for the US today as the Core PPI m/m is to be released later this evening which may provide some insights into how the US tariffs have affected producer inflation. Core Retail Sales m/m and Unemployment Claims will also be released on Thursday evening.
 

EUR

AUD/EUR opens flat at 0.5614 after reaching an overnight high of 0.5632. The pair reacted sharply following the USA CPI data, falling -0.4%, but recovered about half of the loss just as quickly. European equities closed down with the DAX at -0.4% and the CAC at -0.5%. Tonight, we'll see the Eurozone Trade Balance. Tomorrow evening the Euro Final Core CPI y/y data will be released, and on Friday the German PPI m/m is out which is currently forecast at 0.1%.
 

GBP

AUD/GBP opens flat at 0.4867, falling sharply from 15-week highs of 0.4891 to 0.4861 lows following the US inflation report. This morning, Bank of England Governor Bailey spoke at the Annual Mansion House Financial and Professional Services Dinner in London, touching on the recent tariff announcements marking a generational change in the global trading system. The FTSE took a sharp hit, closing at -0.7%. A slow week in terms of upcoming data coming out of the UK. On Thursday they will be announcing the Unemployment Claimant Count Change and the Average Earnings Index 3m/y.
 

NZD

AUD/NZD opens flat at 1.0956. The pairing seems to be at the whim of any tariff news from the US as we approach the August 1 deadline for trade deals in a couple of weeks. Nothing of note in terms of data out today. On Friday, the RBNZ Statement of Intent and Credit Card Spending y/y will be released.