Australian dollar (AUD) gains as RBA downplays inflation concerns
The Australian dollar (AUD) found some support yesterday following a speech by RBA Chief Economist Sarah Hunter, who discussed inflation expectations. The speech, which coincided with the release of a technical Research Discussion Paper, concluded that the RBA is less worried about inflation expectations—a positive development according to Hunter.
Looking ahead, the focus shifts to the upcoming jobs data release due out this morning. Any increase in the unemployment rate above market consensus, may cause some headwinds for the AUD.
New Zealand dollar (NZD) softens as inflation data disappoints
The New Zealand dollar (NZD) edged lower after CPI inflation came in slightly below market and RBNZ expectations, weighing on the currency and local yields.
Figures showed that underlying inflation slowed to 2% y/y, well within RBNZ’s target band for inflation. Focus now turns to how quickly the reserve bank will cut interest rates, with only one further meeting this year before a 3 month break. Additionally, RBNZ’s Karen Silk spoke yesterday on monetary policy transmission, discussing how changes in the central bank’s short-term interest rate influence various economic channels.
US dollar (USD) buoyed by risk-averse trade
The US dollar (USD) trended broadly higher on Wednesday as a risk-averse market mood buoyed the appeal of the safe-haven currency.
However, the upside in the ‘greenback’ remained modest in scope amid growing expectations for a series of interest rate cuts from the Federal Reserve over the next several months.
Coming up, this afternoon will see the publication of the latest US retail sales figures. Sales growth is forecast to have accelerated in September, potentially helping to underpin the US dollar.
Pound (GBP) slumps amid BoE rate cut bets
The pound (GBP) nosedived on Wednesday as the UK’s latest consumer price index reported a sharper-than-expected deceleration of inflation last month.
This weighed heavily on Sterling as it stoked bets the Bank of England (BoE) will deliver consecutive interest rate cuts in November and December.
In the absence of any notable UK economic data today, GBP investors may remain preoccupied by yesterday’s inflation figures, potentially leaving the pound vulnerable to fresh losses.
Euro (EUR) subdued ahead of ECB rate decision
The euro (EUR) struggled to attract support during yesterday’s session as EUR investors braced for the European Central Bank’s (ECB) impending interest rate decision.
Recent EUR data releases have stoked expectations the ECB will deliver another 25 basis-point rate cut when it concludes its October policy meeting later this afternoon.
Unsurprisingly, the ECB’s rate decision will be centre stage today. While a rate cut is mostly priced in, the euro may weaken if the bank’s forward guidance hints at further cuts.
Canadian dollar (CAD) suppressed by soft oil prices
The Canadian dollar (CAD) was mostly rangebound through yesterday’s session as the continued pullback in oil prices limited demand for the commodity-linked currency.
With domestic data in short supply today, the ‘loonie’ is likely to remain tied to oil price dynamics, with further losses likely if crude continues to weaken.
Data Releases
21:30 USD Retail Sales (Sep)