11 May 2022 - AUD opens at 0.6935. All eyes on China and US Inflation data


Market Headlines

Wall St rebounded slightly overnight with the NASDAQ closing +1.0%, while the S&P 500 finished .2% higher. U.S 10-year yields edged slightly lower ahead of this evening key CPI release while oil fell 3.1% and retreated back below the $100 a barrel mark. The AUD/USD closed the session at ~.6937 after earlier trading to a low of .6911.


The ASX fell 1% on Tuesday’s close, with mining shares struggling as commodity prices fell. Treasuries were little changed with the US 10-year slipping 1bp to 3.02% Oil fell with WTI down 1.7% to $101.38 a barrel.


Italian March Industrial Production MoM was 0.0% beating estimates of -1.5% (4.0% previously). German ZEW Expectation (an Indicator of Economic Sentiment) for May was -34.3 (-43.5 expected). Eurozone ZEW Expectation for May was -29.5 an improvement from a previous -43.0.


Fed commentary from Governors Williams, Barkin and Mester on the wires. The theme from comments suggesting that the Fed was watching carefully and there would be 50bp hikes at the next few meetings before a potential pause to assess where “neutral” was. The market saw little reaction to the comments though the greenback was generally bid over the NY morning and into the London rate set.


Wall St remained solid into the close with the NASDAQ +1.0%, the S&P 500 +.2% and the Dow Jones -0.2%.

Currencies

AUD/USD rebounded from early 0.6911 lows to finish the Asian session at 0.6949. During the session AUDJPY traded from 90.70 to nearly a big figure lower at 89.77. AUD/USD then fell around 50 points to trade near 0.6930 while NZD/USD slipped to 0.6285 to test Asian lows. EUR/USD and GBP/USD fell to respective lows of 1.05255 and 1.2292 while USD/CAD moved up to trade near 1.3030.


Into the NY afternoon and the USD continued to firm with the commodity currencies the most affected. AUD/USD fell to within a few points of Asian lows while NZD/USD slipped to 0.6277 and USD/CDA made highs of 1.3052. Ahead of the Sydney open AUD/USD was back near 0.6950.


Currency ranges over the last 24 hours


Market Outlook

China’s inflation data is scheduled for today, with CPI expected by markets to pick up mildly while PPI softens. Markets believe CPI could remain mild for the whole year if consumption remains disrupted by the COVID outbreak. Meanwhile PPI inflation would continue to slide with a higher base kicking in.

In the US, CPI for April will be published this evening with markets expecting the data likely to show YoY core and headline CPI peaked in March. Monthly core services inflation, which reached a fresh cycle high on a monthly basis in March, is likely to have remained firm. Monthly core goods prices, however, may continue to subside.

The AUD/USD traded in a .6911/.6986 range overnight with the next meaningful bout of demand now likely ahead .6850 while topside interest is expected between .7150/.7200.

Upcoming Events

• CN – CPI y/y • CN – PPI y/y

• EU – ECB’s Knot Speaks in Madrid

• GE – CPI y/y

• US – CPI y/y

• US – Real Avg Weekly Earnings y/y

• US – Fed’s Bostic Discusses Economy and Monetary Policy

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