Hot CPI, Hawkish Fed, Kiwi Shock: Aussie Breaks 0.7043
What’s New
- Aussie inflation runs hot: September CPI jumped 0.8% m/m to 4.3% y/y, above the 4.2% expected, with the trimmed mean at 0.3% m/m as forecast. Pricing for an RBA hike on Melbourne Cup Day, 3 November, has surged towards 90%.
- Fed holds, but two want more: the FOMC kept rates at 3.75% to 4.00% on a 10-2 vote, with Cook and Hammack voting to hike. Chair Warsh called the economy resilient and left a December move on the table. The US dollar still slipped against every G10 currency bar the kiwi.
- RBNZ stuns: New Zealand’s central bank held at 2.75% in a 4-3 vote when a hike was more than 90% priced. The kiwi fell around 1.3% and NZD/AUD hit a fresh 13-year low below 0.7950.
Still in play: Brent near US$116 on reports of a renewed Iran push after the midterms, Israel’s deadlocked election, French bond strain and Friday’s ECB and BoJ decisions.
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Key Message: Three decisions, one direction. Inflation at home is re-accelerating, the Fed has paused with a hawkish bias and the RBNZ has blinked. That leaves the Aussie with the best rate backdrop in the region this week, and a US dollar that has lost its pre-Fed bid. |
AUD/USD
|
Overnight (previous session) |
||||
|
Open |
High |
Low |
Close |
Change |
|
0.7026 |
0.7065 |
0.7023 |
0.7053 |
â–˛ Higher +0.39% |
A hot CPI at 11:30am and the RBNZ’s surprise hold an hour later pushed the Aussie through 0.7043 for the first time in five sessions, and a softer US dollar after the Fed’s 10-2 hold carried it to a 0.7065 high before it closed at 0.7053. The bias this week is higher: markets now price a Melbourne Cup Day RBA hike near 90% while the Fed sits on pause, with tonight’s US GDP and core PCE at 11:30pm the main risk to a pullback. Technically, the break above 0.7043 opens the 0.7080 top of the resistance band, and the old cap at 0.7043 is now first support ahead of the 200-day EMA near 0.6984.
Currency Pair Directions
|
Pair |
Weekly Direction |
Range Bias |
|
AUD/USD |
â–˛ Higher |
Cleared the 0.7043 cap that held four sessions; 0.7080 is the next test, and a hot US GDP or core PCE tonight is what pulls it back to 0.7023 |
|
AUD/EUR |
â–˛ Higher |
RBA hike odds near 90% against an ECB expected to hold at 2.65% overnight; a hawkish ECB nod to December is the only catch |
|
AUD/GBP |
â—„â–ş Neutral |
Hot CPI lifts the Aussie, but BoE hike bets keep sterling well bid as gilts digest the Budget |
|
AUD/JPY |
â—„â–ş Neutral |
Rate support for the Aussie runs into Friday’s BoJ decision; an oil spike on Iran headlines brings yen buyers back fast |
|
AUD/NZD |
â–˛ Higher |
A 4-3 RBNZ hold sent the cross to 13-year highs; kiwi December hike odds down to 41% keep the Aussie in charge |
Data key: â–˛ Higher (green)Â Â |Â Â â—„â–ş Neutral (amber)Â Â |Â Â â–Ľ Lower (red)
Upcoming Data Releases This Week
|
Date |
Release |
Prior |
Forecast |
Impact |
|
Thu 29 Oct |
AU Import Prices q/q |
5.7% |
1.8% |
Low |
|
Thu 29 Oct |
US Advance GDP q/q / Core PCE Price Index m/m |
2.2% |
3.2% |
High |
|
Fri 30 Oct |
EU ECB Main Refinancing Rate, Statement and Press Conference (12:45am) |
2.65% |
2.65% |
High |
|
Fri 30 Oct |
AU PPI q/q / Private Sector Credit m/m |
1.3% |
1.0% |
Low |
|
Fri 30 Oct |
JP BoJ Policy Rate, Statement, Outlook Report and Press Conference |
<1.25% |
<1.25% |
High |
|
Fri 30 Oct |
EU Prelim Flash GDP q/q / Unemployment Rate |
0.6% |
0.2% |
High |
|
Sat 31 Oct |
CN NBS Manufacturing PMI |
50.1 |
50.1 |
High |
Public holidays: none remaining this week in AU, US, CA, UK, EU, NZ or China. Heads up: US clocks go back on Sunday 1 November, so US releases land an hour later in Sydney from next week.
