Aussie lifts Eyeing Hawkish CPI Drop Today
AUD
The Aussie Dollar opens the day higher against the majors, with market eyes on CPI for RBA hike clues. Asian equities were mixed into the close as well, with the ASX closing up 0.2% and the SHANGHAI COMP down 0.6%. There was no news out yesterday locally, with Australia’s CPI for Q3 being released at 11:30am today, expected to lift on all figures. CPI m/m expected to rise to 0.7% from 0.4%, CPI y/y expected at 4.2% from 4.0% and the Trimmed Mean CPI m/m forecasted to lift to 0.3% from 0.2%. Prior to this at 11:15am RBA Gov Bullock speaks at a Senate committee, leading to a potentially explosive 30-minute window for FX markets. A trimmed mean result of 1.1% q/q could worry the RBA, though it wouldn’t necessarily prompt a near-term hike. Governor Bullock and Deputy Governor Hauser have both said recently that policy can’t fix current inflation and must instead be set so that inflation eventually returns to the 2.5% target.
USD
The AUDUSD has tracked upwards since yesterday, holding just below monthly highs, opening this morning at a rate of 0.7026. Wall Street finished the day higher, with NASDAQ leading the charge up 1.1%, and both the S&P 500 and Dow Jones closed up 0.6%. October U.S. Consumer Confidence jumped to 91.7 from 84.2, well ahead of the 81.0 expected, while the October Richmond Fed Manufacturing Index held at -0.2, just under forecasts of a flat reading. New Home Sales for September slipped 0.6% to 675k, a smaller fall than the 4.5% drop to 651k that was expected. Overnight, the FOMC is widely tipped to keep the federal funds rate at 3.75–4.00% after September’s hike. Inflation has picked up further since that meeting, and the jobs market remains solid even as hiring has slowed somewhat. The statement is expected to steer clear of forward guidance and instead stress a data-dependent approach to future decisions.
EUR
The AUDEUR opens the day at a 3-year high, reclaiming the 0.63 handle overnight, opening this morning at a rate of 0.6314. European equities finished up in the green, with the DAX up 1.3% and the CAC up 1.1%. Yesterday saw the Spanish Unemployment Rate lift to 10.2%, expected to remain at 9.9%. Looking forward, tonight’s German GfK Consumer Climate is expected to improve to -30.1 from -30.6, with all eyes on Thursday’s rate decision, currently looking to remain at 2.65%.
GBP
The AUDGBP opens the day higher, with the pair edging towards the 0.53 barrier, opening this morning at a rate of 0.5289. British equities were soft into the close, with the FTSE closing up 0.2%. Yesterday BRC Shop Price Index y/y released higher at 2.1%, expected at 1.6% from 1.4%. Tonight will see the UK’s Annual Budget Release, just a week before the BOE's next monetary policy decision. And with inflation concerns still hanging over the economy, the government's fiscal plans could have a say in how interest rate expectations develop over the coming months.
NZD
The AUDNZD opens the day flat, with the pair keeping flat over the past 24 hours, opening this morning at a rate of 1.2363. There was no news out yesterday, with the RBNZ expected to hike the OCR by 25bps to 3% today. The central bank is likely to point to still-elevated inflation pressures, with energy and commodity prices high and the NZD weak, and core inflation now sitting near the top of its 1–3% target band. Last week, RBNZ Chief Economist Paul Conway reiterated that the MPC will probably need to lift the OCR, though the timing is unclear after hikes in July and September.