Soft US Inflation Data Boosts Aussie Dollar
AUD
The Aussie Dollar opens higher against the major currencies, as recession fears dampened due to soft American inflation data released overnight. Asian equities were subdued yesterday as they gradually rose over the session. The Shenzhen +2.2%, Nikkei +0.7% and Hang Seng +0.5%. The ASX closed flat for the second day in a row as financials and materials reversed yesterday’s moves. No economic data to be released out of Australia today, however China will be releasing data centering around their home prices, GDP and retail sales. Chinese GDP is expected to expand 4.5% YoY for Q2, slowing from 5.0% in Q1. Australia’s next economic data piece is on July 23, with our employment figures.
USD
The AUDUSD opens 1% higher at 0.6973 this morning following softer-than-expected inflation data in the U.S. Core CPI m/m released at 0.0% (exp. 0.2%) and CPI m/m released at -0.4% (exp. -0.1%), which lowered Core CPI y/y and CPI y/y down to 2.6% and 3.5% respectively. American equities saw a bump up as a result with the Dow Jones +0.0%, S&P500 +0.5% and Nasdaq +0.9%. Fed Chairman Warsh also testified before the House Financial Services Committee, stating that the Fed has “no tolerance” for persistently high inflation and that the U.S economy appears to be in a good position as unemployment remains low. However, he provided no clear signal regarding the Fed’s next policy move. Tonight will see a similar set of economic news, with Core PPI m/m and PPI m/m releasing alongside Fed Chairman Warsh testifying again before the Senate.
EUR
The AUDEUR opens in the green at 0.6105, due to improved risk sentiment arising from lowered recession fears. European equities closed slightly higher, with the DAX +0.1% and CAC flat +0.0%. There is no major Eurozone data this week, with the majority of the expected volatility stemming from interest rate predictions and geopolitical headlines.
GBP
The AUDGBP opens at 0.5208, buoyed by AUD strength from improved risk sentiment as well as a struggling English economy. English equities continued to increase, with the FTSE closing +0.3%. The BBC announced that Andy Burnham had been confirmed as the new Labour leader from 20 July, effectively confirming him as 59th Prime Minister of the United Kingdom. This morning saw Bank of England Governor Bailey speaking at the Annual Mansion House Financial and Professional Services Dinner, with nothing of note mentioned. No economic data to be released tonight, GDP m/m expected tomorrow which is currently forecast to show no growth over the month.
NZD
The AUDNZD opens at 1.2008, recovering from a drop earlier in the week from 1.2212 to 1.9420. Increased inflation fears have seen markets price in interest rate hikes from the RBNZ. New Zealand quarterly inflation will be released next Tuesday, with the results being instrumental to the RBNZ’s next interest rate decision.