AUD Dips as Hot US Inflation Boosts Fed Hike Odds
AUD
The Aussie Dollar opens largely unchanged against the major currencies as markets adjust to energy inflation concerns and increased rate hike probabilities. Markets are currently pricing in a 76% chance that the RBA increases interest rates when they meet next on September the 29th. Asian equities were lower on Friday with the Nikkei -1.9%, Shenzhen -.8% and Hang Seng -.6%. Locally, Australia’s 3-year yield rose 20 bps, the most since April 2025 to trade over 5%. Meanwhile, the ASX 200 shed -.9%, as materials and technology sectors led losses at -3.6% and -2%. The week ahead will be light data-wise for Australia with the highlight coming this Friday when RBA governor Michele Bullock will appear before the House of Representatives Standing Committee on Economics. Across Asia, the main event this week will come this Friday when the Bank of Japan will meet to decide their interest rate. Markets currently expect the BOJ to increase rates by 25bps to bring the rate up to 1.25%.
USD
The AUDUSD opens flat at 0.7161, as the currency pair traded between 0.7150 and 0.7187 after another American inflation print came through higher than expected. A positive session on Wall St. to end the week saw the Nasdaq and the Dow Jones close +0.1%, while the S&P 500 closed +0.9%. U.S. 10-year yields were steady at 4.97%, while Brent Crude fell 3% to $104.10 a barrel. America’s Core CPI m/m released at +0.3% (exp. +0.2%), while their Core CPI y/y, CPI m/m and CPI y/y met expectations of +2.4%, +0.4% and +3.4% respectively. Following the release of this data, the market is now pricing in a 25bp hike by the Fed on Thursday at about a 90% chance. No economic news out of America tonight, with the next major economic event set for Wednesday night with US Retail Sales data.
EUR
The AUDEUR opens slightly higher at 0.6178, as the currency pair reached highs of 0.6193 over the weekend before settling at this morning’s levels. European equities closed higher over the weekend, with the DAX +0.8% and CAC +0.8%. European Central Bank President Legarde spoke twice on Friday night, with markets hoping for clues on the ECB’s thoughts on future interest rate movement, she noted that the ECB will proceed on a meeting-by-meeting basis, using data to inform coming decisions. ECB President Legarde is due to speak again tonight at Hofburg, Vienna.
GBP
The AUDGBP opens flat at 0.5295 this morning, losing the .53 handle over the weekend. English equities closed in the green with the FTSE up +0.4%. Friday afternoon saw the release of the UK's GDP m/m surpass expectations, releasing at +0.4% (exp. 0.0%), while July Industrial Production printed 2.0% (Est. -0.2%). No economic data out of England today, with the next data piece being Claimant Count Change out tomorrow, expected to release at +8.3K from a previous -11.0K.
NZD
The AUDNZD opens in the red at 1.2311, reaching lows of 1.2278 over the weekend before rebounding to current levels. Some minor data out earlier this morning, with BusinessNZ Services Index coming in at 51.2 from a previous 50.6. Visitor Arrivals m/m also released at +0.5% from a previous 0.0%, showing a rebound in tourism for New Zealand.