AUD Dips as Core Inflation Data Misses High Expectations
AUD
The Aussie Dollar opens in the red against the majors this morning following Australia's headline inflation coming in slightly below expectations. Asian equities ended mixed yesterday with the Hang Seng +1.7%, Shenzhen +1.1% and the Nikkei -1%. Locally the ASX 200 finished -0.3% as health care and financials sectors underperformed at -1.4% and -0.6% respectively. The Inflation data released yesterday showed a less than expected rise of 4.6% y/y (Est. 4.8%) and 0.8% q/q (Est. 0.9%) on the trimmed mean which caused the Aussie Dollar to dip slightly, but did nothing to quell expectations of a future rate hike when the RBA meets next week. Some minor data set for release today with Private Sector Credit m/m and Import Prices q/q but will likely do little to move markets. Looking to Asia, China will see the release of Manufacturing & Non Manufacturing PMI and RatingDog Manufacturing PMI data which are currently forecast to remain relatively flat. Nothing major of note for the rest of the week locally until next Tuesday when the RBA meets.
USD
AUDUSD opens down at 0.7120 this morning after the US Fed held interest rates steady during Jerome Powell's final decision as Fed Chair. Wall St. was mixed overnight with both the S&P 500 and Nasdaq closing unchanged, whilst the Dow was -0.5%. WTI Crude jumped 8% higher to US$108.00/barrel as reports emerged that Donald Trump had rejected an offer from Tehran to reopen the strait of Hormuz. As the FOMC kept rates on hold in line with expectations, the vote was not unanimous however with a 8-4 split being the most divided decision since 1992. Powell said that despite dissent from four officials who opposed maintaining an easing bias, he does not see the Fed tilting toward raising interest rates. A big day ahead on the economic calendar for the US with Advance GDP q/q, Core PCE Price Index m/m, Employment Cost Index q/q and Unemployment Claims set to release. The PCE price index for March expects the headline figure to rise +0.7% m/m (prev. +0.4% m/m), largely reflecting the surge in gasoline prices. Core PCE inflation is expected to ease modestly to +0.3% m/m, down from +0.4% in February. The release may influence expectations for Fed’s near-term policy path.
EUR
AUDEUR follows suit opening down at 0.6097 following US Fed Chair Powell's remarks lifting USD demand. European equities were lower into the close with the DAX and CAC at -0.3% and -0.4% respectively. A relatively quiet day yesterday out of the Eurozone yesterday as attention shifts squarely to the ECB rate decision later tonight. They are largely expected to hold and adopt a more cautious wait and see approach. Eurozone headline CPI for April is set to release today and is currently forecasted at 3% y/y, largely due to the impact of higher energy prices since the start of March.
GBP
AUDGBP loses its 0.53 handle overnight and opens at 0.5281. The FTSE also closed in the red coming in at -1.2%. The Bank of England will also meet later this evening to decide the official cash rate and a majority of economists expect an 8-1 split in favor of keeping rates on hold this month.
NZD
AUDNZD opens flat at 1.2206 after trading sideways overnight. Yesterday morning RBNZ Gov Breman spoke at a panel in Hamilton and adopted a more hawkish stance, noting that "the best contribution monetary policy can make is to remain focused on ensuring aggregate inflation returns to 2 percent over the medium term". Inflation currently sits at 3.1% y/y in New Zealand. Later this morning ANZ Business Confidence is set to release with nothing major expected to release for the rest of the week.