AUD bolstered on strong inflationary numbers

Australian Dollar:

The Aussie dollar got off to a slow start on Wednesday opening just shy of the US94 cent mark as investors sat on the fence waiting for the highlight of the week, the AUD inflation numbers. The data did not disappoint and the strong inflation figures helped the Australian dollar climb above US94 cents touching daily highs of 0.9436. The Trimmed Mean CPI was released ahead of forecast at 0.8 per cent whilst the Core CPI was on par with expected at 0.5 per cent. These figures are important as they remain a key variable when determining monetary policy settings and as such investors took the release as a sign interest rates will continue to be held for the time being. As the European markets began to trade the AUD climbed once again touching highs of 0.9460 to open today over half a cent stronger at 0.9446. Today there is no local data however overnight the US does have a heavy docket which should spur continued volatility for the higher yielding currency.

• We expect a range today of 0.9400 – 0.9490

New Zealand Dollar:

For the third day in a row the NZ dollar experienced Asian trade with a lack of volatility. Without local data in the market the Kiwi looked offshore for direction however even a strong CPI reading from across the Tasman struggled to get the higher yielding currency moving. Overnight trade continued at a dull pace however the NZ dollar does open marginally stronger against the Greenback this morning at 0.8685. Today will be an important event for the NZ dollar as the RBNZ meets to determine the official cash rate. At the moment it seems inflationary pressures and slowing dairy prices have onlookers in two minds over whether the Reserve Bank will continue its run of rate increases in line with previous market expectations.

• We expect a range today of 0.8590 – 0.8680

Great British Pound:

The British Pound moved slightly lower against the US dollar overnight as investors contemplated the release of the Bank of England Minutes. Recently the market has watched as the Sterling strengthened with the likelihood of an interest rate rise on the horizon seeming more and more likely. The minutes showed a unanimous vote to keep the rates on hold and read showing a few concerns over an early hike. The committee showed worries over a rate rise coming too early affecting the economy’s recovery as the global economy is displaying signs of weakness. Another factor was the soft wage increases compiled with the robust employment growth making the current health of labour market difficult to gauge. The Sterling opens today weaker against the US dollar at 1.7038 this morning and similarly lost ground versus the higher yielding AUD (1.8034) and NZD (1.9596). All eyes locally now turn to retail sales being released overnight.

• We expect a range today of 1.7995 – 1.8090

Majors:

The Euro opens at the same levels as Wednesday this morning at 1.3461 managing to claw back from the eight month low against the US dollar. Consumer confidence was released as weaker than expected however the market shrugged the soft reading aside. Investors around the globe are still carefully watching geopolitical events as tensions in the Ukraine and Russia continue. The US has placed further sanctions on Russia which can place strain on the European currency. Tonight investors watch as a myriad of important data is to be released from the Eurozone and the US, which is sure to push geopolitical events to the side as economic print is to be once again brought back into the spotlight for market movement. 

Data releases:

• AUD: No Data
• NZD: Official Cash Rate, RBNZ Rate Statement, Trade Balance
• JPY: Trade Balance, Flash Manufacturing PMI
• GBP: Retail Sales m/m
• EUR: Spanish Unemployment Rate, French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI, Italian Retail Sales m/m
• USD: Unemployment Claims, Flash Manufacturing PMI, New Home Sales, Natural Gas Storage