Originally published by AxiTrader
Markets Overview:
- Equities: Nikkei 225 (+0.05 %), Hang Seng (-0.70 %), CSI 300 300 (-0.31 %), KOSPI (-1.21 %), S&P/ASX 200 (-1.53 %)
- Commodities: Crude Oil $49.27 (-1.38 %), Brent Oil $50.16 (-1.24 %), Natural Gas $2.77 (-0.25 %), Gold $1274.66 (+0.06 %), Copper $213.10 (-0.35 %)
What traders are talking about:
Australian CPI beats expectations
The Australian inflation figures came in better than expected by the market, at 0.7 % quarter-on-quarter (0.5 % expected, 0.4 % previous) and 1.3 % year-on-year (1.1 % expected, 1.0 % previous). The trimmed mean numbers, to which the RBA pays most attention to, arrived in line with expectations, at 0.4 % quarter-on-quarter and 1.7 % year-on-year. The ABS (Australian Bureau of Statistics) explained that floods in the past quarter led to an increase of fruit and vegetable prices, which could partly explain the difference between the headline and the core CPI figures.
Expectations for a RBA rate cut next month have declined following the data release, with the market now pricing in only a 7 % chance, vs. 15 % previously. AUD/USD jumped from 0.7625 to 0.7710 after the data was released, although it fell back to 0.7680 shortly after. Strong demand was seen for AUD/NZD, which rallied from 1.0640 to 1.0755 post-CPI. This put the Kiwi Dollar under pressure, and it declined from 0.7175 to 0.7150 against the US Dollar.
Thoughts on CPI
Australian bank ANZ thinks that despite the stronger than expected headline numbers, the "underlying measures of inflation remain soft and weak inflationary pressure are widespread". ANZ expects the RBA to downgrade its inflation expectations next week, but does not see a rate cut happening at that meeting.
US investment bank JP Morgan also thinks that the RBA will remain on hold for the rest of this year, but notes that core inflation remains quite low and expects further rate cuts in the first half of the next year.
Australian bank NAB notes that the strong headline number has been caused by the jump in fruit and electricity prices, and highlighted that the core measures were again low, but still in line with RBA forecasts.
China consumer confidence improves
The Westpac MNI consumer sentiment indicator arrived at 117.1 vs. 115.2 in September. It is the highest print since April of this year and two of the five components have increased, while the other three saw a small decline. Westpac noted that Chinese consumer confidence is showing promising signs of a lift with consumers more optimistic on finances and durables spending. However, the indicator is still within the 110-118 range that has prevailed since 2014, and Westpac highlighted that the "lacklustre mood reflects on-going weakness in business conditions and concerns about job security".
Yuan strengthens
The CNY/CNH has been declining steadily in the past few trading days, but today, the currency managed to strengthen against the US Dollar. USD/CNH, the offshore Yuan, fell from 6.7825 to a low of 6.7728. Meanwhile, the PBoC set today's USD/CNY fix at 6.7705 (vs. 6.7744 previously).
Economic Calendar:
- 14:45 BST - US Services PMI
- 15:00 BST - US New Home Sales
- 22:45 BST - New Zealand Trade Balance