AUD Trades Sideways In Anticipation of CPI Release

AUD

The Aussie Dollar opens largely flat against the majors after trading sideways overnight, as markets anticipate the release of key Australian inflation data. Asian equities ended lower yesterday with the Nikkei and Hang Seng both -1% and the Shenzhen -0.3%. Locally the ASX 200 closed -0.6% with consumer discretionary and utilities leading losses, both at -2.3%. Commodities closed mixed with Gold +0.1%, Silver -0.1%, Iron Ore +0.1%, and Copper -1.6%. In Australia, the CPI for Q1 is out today, with headline CPI inflation forecasted to increase 1.3% m/m, largely driven by the increase in retail petrol prices. However, the RBA will be more focused on its preferred underlying measure, the trimmed mean CPI which is expected to come through slightly higher at 0.3%. CPI y/y is expected to skyrocket to 4.8% which is above the earlier RBA forecast and well above the RBA's 2.5% y/y inflation target band mid-point. The CPI release should pave the way for the RBA to hike rates by a further 25bp at its May meeting. Nothing else major this week for the AUD, however all eyes will be focused on the rate decision next Tuesday. Across Asia, the Bank of Japan kept rates steady at 0.75% yesterday and will be observing a bank holiday today.

USD

AUDUSD opens flat this morning at 0.7182 due to risk-off flows driven by the Iran war and a wait and see attitude pre Fed rate decision. Wall St. traded lower overnight with the Nasdaq closing -0.9%, the S&P 500 -0.5%, and the Dow Jones -0.1%. U.S. 10-year yields were steady at 4.34%, while Brent Crude rose 2.7% to $111.20 a barrel. In the U.S, the FOMC is widely expected to keep the Federal Funds rate unchanged at 3.50–3.75% when meeting overnight amid renewed inflation pressures and improvements in the labour market. The communication will likely acknowledge headwinds facing the economy stemming from the recent oil price shock. The committee is also expected to refrain from offering any forward guidance, instead emphasizing the data-dependent nature of their policy decisions. Looking ahead for the US, tomorrow will have GDP, Core PCE and Employment data set to release.

EUR

AUDEUR opens largely flat at 0.6130 after what was a quiet day for EUR data with only the Spanish Unemployment Rate releasing, coming through higher than forecast at 10.8%. Eurozone equities closed lower with the DAX -0.3% and the CAC -0.5%. Looking at Eurozone data today, the main event will be German Prelim CPI m/m, which is forecasted to come through lower at 0.7% from the previous reading of 1.1%. Looking ahead, tomorrow night the ECB is largely expected to hold rates tomorrow at 2.15% with no case for an April rate hike, and optionality is back on the table, ranging from “a cut could be needed if the economy moves toward recession” to “market bets on two rate hikes not unreasonable". 

GBP

AUDGBP trades sideways overnight opening flat at 0.5311. No news of note yesterday, and the UK equities had no major movement with the FTSE closing +0.1%. Another quiet day for the UK, however tomorrow the Bank of England is poised to keep rates on hold at 3.75% at its April meeting. Financial markets are however once again pricing upwards of two Bank of England rate hikes this year, as the BOE was evidently caught off guard by the reaction to its March decision, which saw even the most dovish officials appear open-minded about hiking rates. 

NZD

AUDNZD opens higher this morning at 1.2205. Nothing of note yesterday from our Kiwi neighbours, however later this morning RBNZ Gov Breman will be speaking in a panel discussion about national and global economic trends at an event hosted by Love the Centre and Waikato Young Professionals, in Hamilton. ANZ Business Confidence is set to release tomorrow.