Price action muted as focus turns to US inflation report
Daily Currency Update
The Australian dollar offered little to excite investors through trade on Wednesday. Price action was largely subdued as investors sideline major bets ahead of this evening’s all-important US CPI update. US PPI data showed wild variation across industries and sectors, and while headline PPI was hotter than expected when trade services and energy prices were stripped out came in right on expectations. The Federal Reserve meeting minutes also afforded no new insight into Fed thinking, elevating the importance of key macro data points. With the USD broadly steady, the AUD gave up two-tenths of a per cent on the day as commodity prices and commodity-linked currencies all gave up ground. With oil prices reversing the week's early risk on gains, attention returned to fears the global recession will be deeper and longer than first anticipated.With little of note on today’s domestic ticket, our focus turns to the US CPI inflation report.
Key Movers
Price action among major currencies was largely subdued through trade on Wednesday as investors squared positions ahead of today’s all-important US CPI update. The euro, GBP and JPY all tracked within a narrow range, while the USD DXY index was mostly unchanged. The CAD and Norwegian krone both moved lower as oil prices resumed last week's downward correction, giving up the risk on gains won earlier this week. Fears of a broader downturn in global economic activity have dampened demand for key raw materials and commodities with oil bearing a heavy weight.Our attention now turns to tonight’s critical US CPI report. Fed speakers have openly highlighted the impact of natural tighter financial conditions and yesterday’s September meeting minutes illustrated the FED’s penchant for a more cautious approach moving forward. Policymakers agreed they should “proceed carefully” when considering future rate decisions. While they expect to leave rates higher for long the need to continue lifting interest rates may have passed. We expect both headline and core inflation will have increased through September but a slowdown in the pace of appreciation should see the annualised rate move back toward the Fed’s target. A softer print removes the need for the Fed to raise rates again this year and could add more downward pressure on US treasuries and the dollar.
Expected Ranges
- AUD/USD: 0.6280 - 0.6500 ▼
- AUD/EUR: 0.5880 - 0.6100 ▼
- GBP/AUD: 1.8980 - 1.9420 ▲
- AUD/NZD: 1.0600 - 1.0700 ▼
- AUD/CAD: 0.8700 - 0.8800 ▼