Dollar Holds Firm on Sticky U.S. Inflation
AUD
The Aussie Dollar sees a slow start to the week, opening mostly down against the majors, with only a small gain against the USD from PCE concerns on Friday night (the U.S. Federal Reserve's preferred inflation gauge). Commodities saw solid gains with Oil up 1.1%, Nat Gas up 0.7%, Gold up 0.3%, Silver up 2%, Copper up 0.3% and only Iron Ore was down by 0.1%. Asian equities saw a similar story, with the ASX up 0.2% and the SHANGHAI COMP down 0.7%. It was a quiet finish to the week, with no data, with today being the same story. Tomorrow will see the Reserve Bank of Australia's cash rate announcement, currently expected to remain at 3.60%. There appears to be a growing consensus that Australia’s central bank is done with rate cuts this year. While this is usually good for the underlying currency, the cause of that outlook has some analysts a little worried. Australia’s inflation for Q2 was much hotter than anticipated but didn’t come along with increased economic growth. That could put the RBA in a tricky situation and leave the Aussie weaker despite rates staying higher for longer. The AUD will be highly susceptible to RBA Governor Bullock's commentary tomorrow.
USD
The AUD/USD sees a feeble rise to open the week from robust PCE data, seeing the pair open this morning at a rate of 0.6551. Wall Street took the opportunity to rally of the back as well, seeing the DOW JONES gain 0.7%, the S&P 500 gain 0.6% and NASDAQ up 0.4%. The Core PCE Price Index m/m came in unchanged at 0.2%, the same reading from a year ago. Despite the unchanged reading, markets are still expecting an interest rate cut at the next FOMC meeting, but this reading has given uncertainty to how many more before the end of the year. The annual PCE climbed to 2.7%, up a little from last month, and the Core figure (which strips out volatile food and energy prices) printed at 2.9%. Inflation is stuck above the level that most policymakers consider healthy. Revised UoM Consumer Sentiment has stayed strong at 55.1, previously at 55.4. Tonight will see FOMC Member Waller and Hammock speaking in Frankfurt, unlikely to cause much movement. Markets will be focused on US Non-Farm Payrolls for September on Friday night. Markets are expecting monthly jobs growth of around 43,000 and an unchanged Unemployment Rate at 4.3%.
EUR
The AUD/EUR took a small dip on Friday, seeing the pair slipping under the 0.56 barrier, opening this morning at 0.5595. European equities finished in the green, with the DAX up 0.9% and the CAC up 1%. It was a quiet close to the week for the Europeans, with nothing over the weekend either. Tonight will see the Spanish Flash CPI y/y, looking to increase from 2.7% to 3.1%.
GBP
The AUD/GBP opens the day lower, dropping the 0.49 barrier early Friday morning, opening this morning at 0.4885. British equities saw a strong rise, seeing the FTSE finish up 0.8%. There was no data out of the UK to finish the week, with it being a quiet week ahead for them as well. Mortgage Approvals are looking to remain at 65k, with the event of the week will be this Friday when we see BOE Gov Bailey speaking in Amsterdam.
NZD
The AUD/NZD is holding at the 3-year highs, keeping firm over the weekend, with the pair opening this morning at 1.1342. There was no news out since Friday and there isn’t anything out today. ANZ Business Confidence is due tomorrow morning.