Australian dollar drops sharply in Asian session after release of consumer inflation data. Headline CPI rose 0.5% qoq, 1.5% yoy in Q3, below expectation of 0.7% qoq, 1.8% yoy. The year-over-year rate was unchanged from Q2 and stayed well below RBA's target of 2-3%. The RBA trimmed mean CPI rose 0.3% qoq, 2.1% yoy, below expectation of 0.5% qoq, 2.4% yoy. RBA weighted median CPI rose 0.3% qoq, 2.2% yoy versus expectation of 0.5% qoq, 2.5% yoy. There has been some speculations that RBA could cut benchmark interest rate next week to counter recent rate increase by the largest four retail banks in the country. And some analysts noted that today's benign inflation reading would give the central bank some more food or thoughts for rate cut. And some noted that even if RBA is on hold in November, there is still a high chance for the central bank to lower interest rate from the current 2.00% level to 1.50% nest year.
FOMC rate decision the main focus today. Fed is widely expected to keep policies unchanged. And the main question is whether Fed will give any hints on the chance of a December rate hike. As of yesterday, fed fund futures are only pricing in 35% of a hike in December, not much different from a month ago. Meanwhile, markets are just pricing in only 57% chance of a hike by March. Some analysts noted that it's unlikely for Fed to give any signal, though. And more time is needed for policy makers to determine if the recent slow down in hiring is temporary. Meanwhile, assessment for inflation would likely remain unchanged. Based on recent dovish rhetoric from ECB, weakness in oil price and firmness in US stocks, the greenback will likely stay supported after the FOMC statement.
Elsewhere, Germany will release Gfk consumer sentiment. US will also release trade balance. RBNZ will announce rate decision tomorrow and is expected to keep interest rate unchanged at 2.75%.