AUDNZD Jumps on Weak NZ CPI Data and Hawkish RBA Minutes
The AUDNZD pair jumped sharply in the overnight session following a weaker-than-expected QQ CPI release from New Zealand. The data showed that inflation was running at 1.8% on a quarterly basis and 5.6% on an annual basis, both below expectations. This miss in CPI data confirmed that the Reserve Bank of New Zealand is likely to hold interest rates at its next meeting, which is scheduled for November 2.
In addition, the release of hawkish RBA minutes on Tuesday also gave the AUDNZD pair a boost. The minutes showed that the Reserve Bank of Australia is still considering raising interest rates again in November, despite the fact that inflation is already below the RBA’s target of 2-3%.
US Equity Futures Manage to Hold Onto Key Support as Volatility Pushes Lower
US equity futures managed to hold onto key support levels on Tuesday, despite a volatile session. The VIX, which is a measure of implied volatility on the S&P 500, fell back towards its 200-day moving average, which shows that investors are becoming less fearful.
However, yields on US Treasury bonds continued to creep higher, which is a headwind for equities. Investors are worried that the Federal Reserve will continue to raise interest rates aggressively in an effort to combat inflation.
Sterling Pushes Lower After Lower-Than-Expected Wage Numbers
The pound came under some pressure in early European trading on Tuesday following the release of weaker-than-expected wage data. The Office for National Statistics (ONS) said that regular pay, excluding bonuses, rose by 5.2% in the three months to August, below expectations of 5.4%.
The ONS also said that it had received too few survey responses to release the actual jobs and unemployment data. This meant that trading the event was a bit too risky for investors.
EURGBP Pushing Higher
Despite the weak wage data, the EURGBP pair pushed higher on Tuesday, in line with analysts’ expectations. The big trigger for more upside could come from tomorrow’s CPI data, where analysts are expecting to see a lower number across the board. This would push EURGBP towards key resistance at 0.8700.
FX Strength Matrix
In FX, the AUD is leading the major currencies to the upside after the RBA meeting minutes kept the door open to another hike. The NZD is the weakest of the majors following last night’s weaker-than-expected QQ CPI data.
Main Data Events for the Rest of the Day
The main data events for the rest of the day are the Canadian CPI and US Retail Sales data.
The CAD has been difficult to trade medium-term as there seems to be something different driving the currency every day. Thus, a scalp trade out of the event if we get a very big miss or beat across the board in CPI data seems the most appropriate in today’s session.
With the AUD the strongest and GBP weakest, pairs to watch for Canadian CPI data are possible AUDCAD upside on a very weak CPI release, or GBPCAD downside on a very hot CPI release.
US Retail Sales
Given the current situation across major asset classes, the best-case scenario for a trade today is a big miss across the board in the US Retail Sales data. If we see a big miss, we would like to look for downside opportunities in the USD versus the AUD, EUR and XAU (gold), as well as possible long opportunities in equities as well.
If we see a big beat in the data, we don’t want to chase the USD higher, gold lower or equities lower. Another option for a very strong Retail Sales print could be to simply wait for a possible momentum news failure setup. As always, watch those Retail Sales revisions closely!
This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
All trading carries risk.