Aussie Dollar Flatlines as Middle East Tensions Flare

AUD

The Aussie Dollar opens virtually unchanged against the majors amid a light economic calendar and renewed hostilities in the Middle East. Asian equities finished mixed yesterday as the US-Iran war showed little sign of abating. The Shenzhen trading +.3%, the Nikkei and Hang Seng both -.2%. Locally the ASX 200 closed -.1%, as healthcare and consumer discretionary led losses at -1.5% and -1.1%. No local data out yesterday, however China's headline inflation figures released with PPI y/y printing at 3.8% (exp 3.6%) from a previous 3.5% and CPI y/y coming in at expectations of 0.8% from a previous 0.5%. The data shows tentative signs of a recovery from its prolonged deflationary period. Some minor data out locally today with MI Inflation Expectations set for release, previously printing at 4.9%. The rest of the week will be quiet on the data front for Australia.

USD

AUDUSD opens flat at 0.7218 this morning, trading in a range of 0.7212/37 overnight as the US and Iran trade attacks on oil tankers in the Gulf. Rising oil prices and lower bonds continued to weigh on broader risk sentiment overnight. On Wall St. the Dow Jones closed -0.7%, the Nasdaq -0.6%, and the S&P 500 -0.5%. US 10-year yields rose 5bps to 4.84% following an underwhelming $6b worth of bond purchases by the US Treasury. Yesterday was a quiet day data-wise for the US as markets focus on this evenings key data releases. PPI data for August will be released, with Core PPI m/m currently forecasted 0.3% (prev 0.2%) and PPI m/m forecasted at 0.4% (prev 0.0%). As an early inflation indicator, markets will focus on components linked to core PCE, which is the Fed's preferred measure of tracking inflation. Also out tonight is US weekly Unemployment Claims which are expected to print at 205k from a previous 206k. Looking ahead, tomorrow evening will have US CPI inflation data out to close the week.

EUR

AUDEUR opens almost unchanged from yesterday at a rate of 0.6203 ahead of the ECB's interest rate decision later this evening. European equities were lower across the board with the DAX and CAC coming in at -1.7% and -1.9% respectively. The ECB will announce its monetary policy decision tonight with a hike to 2.50% being almost a certainty, which would take rates to the top-end of ECB estimates of neutral. Markets will be focusing on whether ECB commentary indicates any signs of further hikes. Looking ahead, ECB President Lagarde is due to make two speaking appearances in Paris this Saturday and may provide some commentary on the ECB's decision.

GBP

AUDGBP comes in flat at 0.5326 this morning after a quiet spell data-wise for both countries. UK equities closed in the red with the FTSE coming in at -1.3%. After a quiet week for economic news, tomorrow and the week ahead are set to ramp up for the UK with GDP m/m figures out tomorrow which are expected to show flat growth of 0.0% (prev 0.3%). Looking ahead to next week, Tuesday will see UK Claimant Count Change data, on Wednesday we have CPI y/y inflation data and on Thursday the Bank of England has their interest rate decision. 

NZD

AUDNZD continues to rally and opens in the green at 1.2357, setting a fresh 13-year high. No data out today and some minor data out tomorrow with the BusinessNZ Manufacturing Index out tomorrow to close the week.