AUD Loses Ground as Strikes Continue in the Middle East

AUD

The Aussie Dollar opens down against the majors this morning following a fresh round of US strikes against Iran. President Trump stated that the US will be "attacking Iran hard" and has claimed to have taken out 22 Iranian vessels recently. Asian equities finished lower yesterday with the Nikkei trading -1.9%, Shenzhen -1.1% and the Hang Seng -0.6%. Locally the ASX 200 gained 0.6% as consumer staples and consumer discretionary sectors outperformed at +3.9% and +3.6%. Later this morning, MI Inflation Expectations are set to release, which may provide some insight into where consumers expect the price of goods and services to be in 12 months; previously it came in at +5.6%. A flurry of Chinese economic data was released yesterday as May PPI printed in line with market expectations of 3.9% y/y (Est. 3.9%) and CPI came in at 1.2% y/y (Est. 1.3%). Looking ahead, it will be a quiet end to the week with no major data on the horizon.

USD

AUDUSD loses the 0.7 handle overnight to open at 0.6993 due to the greenback strengthening off the back of surging safe-haven demand. The strained ceasefire in the Middle East and further selling in the technology sector weighed on global equities and saw oil trade higher overnight. On Wall St, the Nasdaq closed -2%, the Dow Jones -1.9%, and the S&P 500 -1.7%. US 10-year yields rose 3bps to 4.55%, while Brent Crude rose 2% to $93.30 a barrel. US CPI for May printed at +0.5% MoM and +4.2% YoY with both numbers matching expectations. Core CPI printed at +0.2% MoM, falling short of forecasts of +0.3% with the YoY number at +2.9% as expected. The inflation figures reinforce the view that the Fed could keep interest rates elevated for longer. The US Producer Price Index will be released later tonight and are currently forecast to show a deceleration with Core PPI m/m expected at 0.5% from 1.0% and PPI m/m expected at 0.7% from 1.4%.

EUR

AUDEUR opens in the red at 0.6063 ahead of the European Central Bank monetary policy decision tonight. European equities were weaker at close with the DAX and CAC coming in at -1.0% and -0.5% respectively. Markets are currently expecting a 25 bp rate hike which would take the rate to 2.25% following recent hawkish commentary around rising inflation in Europe. The rest of the week will be light on data for the eurozone with commentary from the ECB post meeting likely being the last focal point of note.

GBP

AUDGBP opens this morning down at 0.5234 as continued military friction between the US and Iran in the Middle East has injected safe-haven demand into the broader foreign exchange markets. UK equities rebounded at the close with the FTSE coming in at +0.3%. Nothing major on the economic calendar today for the UK, with markets now focused on tomorrows GDP m/m release which is currently forecasted to show a decline of -0.1%.

NZD

AUDNZD opens relatively flat at a rate of 1.2075 this morning after a tame week for data out of New Zealand. Tomorrow morning, Visitor Arrivals m/m and the Business NZ Manufacturing Index are set for release which will do little to move markets.