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Global Market Update
The View from Australia

by Craig Killaby | June 10, 2021

Data/Speakers

 

> AU May MI Inflation Expectations : 4.4% v. 3.5% prev.

> EU ECB Monetary Policy Statement/Decision & Press Conference : 0.00% v. 0.00% exp. (no change)  

> US May H/line CPI & Core CPI : 0.6% & 0.7% v. 0.4% & 0.5% exp.

> US Unemployment Claims : 376K v. 370K exp.

 

Overnight Headlines (BBG)

> The ECB kept their policy unchanged at their recent meeting, however there seem to be differing opinions as to the amount of QE to be in place during the next few months with the summer conditions seeing less liquidity

What you need to know

The important data for the week has come and gone without major market movement, as investors have taken the stance that the inflationary pressures are not yet at high enough levels to see the Fed shift their policy stance and narrative. Prior to the US CPI number was the ECB’s meeting, where President Lagarde painted an optimistic picture of the European economy although there are differences within the Bloc on the level of stimulus required in the coming months. EURUSD was whippy on the CPI release, however most of the majors are up marginally against the sliding Buck.

 

Consumer prices in the US gained yet again in May, at the fastest pace since the summer of 2008 with a y/y inflation rate of 5%. Market participants chose to look deeper into the report and decided that transitory reopening pressures accounted for the major move higher as used car prices accounted for nearly one third of the increase. Despite the clear price increases, investors have deemed it not sufficient to see Fed policy changed and the reaction in UST yields lower across the curve was a clear result. The Dollar is a touch lower in DXY terms, down 0.10% while commodity backed currencies were the best performers of the session with commodity prices jumping higher yet again. US equity markets performed well, with the S&P500 up 0.5%. Commodities mostly higher, with the exception of Copper down 0.7% Iron Ore continues its run higher up over 2% on the session. Gold and WTI crude both up nicely on the session.

 

The Day Ahead

 

Data

 

> NZ May Business NZ Manufacturing Index : 58.4 prev.

> UK April Industrial Production : 1.2% exp.

> UK April Manufacturing Production : 1.5% exp.

> UK BOE Gov. Bailey to speak

> US June Prelim UoM Consumer Sentiment : 84.1 exp.

> US June Prelim UoM Inflation Expectations : 4.6% prev.

 

With the US CPI numbers washing over markets without any major impact, local investors will now have their eye on next week’s FOMC meeting as the upcoming risk. The sideways trading of the AUDUSD continues, with the brief wide range in the choppy aftermath of the US CPI data the pair opens up largely unchanged, up slightly. Will get no favours from the data docket today, very sparse throughout the session. All eyes on next week’s important data with AU employment and US Fed’s decision the major risks.

 

Range for the day : 0.7735 – 0.7780

 

AUD/USD Technicals

 

The pair continues to respect the multi-month trading range, with upside seeming to run into hurdles around the 0.7765 mark. Will need to see the 0.7691 level broken to change the view to bearish, with a neutral bias still well in place.

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