> AU March Retail Sales : 1.3% v. 1.4% exp.
> AU April NAB Business Confidence : 26 v. 17 revised prev.
Overnight Headlines (BBG)
> Inflation is top of mind yet again for investors, with key gauges pointing to an uptick over the next few months as borrowing skyrockets
What you need to know
The back and forth continues yet again as strong commodity prices and global growth expectations saw the inflation commentary brought back to the forefront. The data yesterday in Australia was mixed, with a slightly softer retail sales number being overshadowed by a very strong NAB business confidence survey, as the recovery continues to be underway in AU despite an extremely poor vaccine rollout. The AUDUSD traded in a tight range yesterday after breaching key resistance following Friday’s US jobs report, while surging commodity prices lent support for the currency as the price of Iron Ore touches eye popping numbers above US$210/tonne.
In the UK, the focus was on the possibility of the Scottish referendum vote following the election in Scotland. The risk was unwound following the election results, which saw the GBPUSD surge back above the 1.4100 handle and drag most of the majors higher against the Greenback. The AUDUSD touched a high of 0.7891 overnight, only to reverse gains as inflation jitters took over. The S&P500 is down over 1% as I write, with rising UST yields and inflation expectations lending support to the Dollar later in the session. Commodity currencies were unable to hold on to yesterday’s gains, with the AUD and NZD down near 0.3% while the Loonie was able to edge out 0.2% gain. Gold has seemed to have bounced off support around US$1800/oz and up 0.3% on the session, with the story in commodities being the move higher in the price of Iron Ore as it is up a staggering 4.6% on the day. Copper still elevated, although down over 1% from yesterday’s opening prices.
The Day Ahead
> JP March Household Spending : 1.4% exp.
> CN April CPI & PPI : 1.0% & 6.5% exp.
> EU March Italian Industrial Production : 0.5% exp.
> EU May German ZEW Economic Sentiment : 72.0 exp.
> AU Annual Budget Release (7:30 AEST)
> UK Bank of England Gov. Bailey to speak
> US FOMC Members Williams, Brainard, Daly and Bostic to speak
The next two days will be important for the inflation narrative, with the Chinese numbers hitting the wires around mid-day today with the producer price numbers in focus. Apart from the data out of China it will be the local budget the will catch the eyes of investors this evening as government support remains in place despite the local recovery. US policymakers will be giving markets something to digest tonight in the US, with the shift back into where the Fed’s policy path forward the most important narrative in markets at the time being.
Range for the day : 0.7815 – 0.7860
The pair remains elevated above 0.7816, previous resistance and looking poised to build bullish momentum as strong commodity prices have been supportive of the move higher. Intraday high of 0.7891 will be the ultimate target, however the pair seems likely to trade lower as surging UST yields are Dollar supportive in the near term.
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