Asian Session Forex Recap – Oct. 26, 2016

Article Highlights

AU CPI (q/q) up by 0.7% vs. 0.5% expected, 0.4% previous
AU CPI (y/y) up by 1.3% vs. 1.0% in Q2 2016, 1.1% growth expectations
AU trimmed mean CPI (q/q) clocks in at 0.4% as expected
RBA’s weighted mean CPI (y/y) remains at 1.3% vs. 1.4% growth estimates

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The Aussie took center stage in today’s Asian session trading, as Australia printed its inflation data for Q3 2016. Here’s a summary of what happened during the session!

Major Events:

Australia’s CPI release – Data from the Land Down Under showed consumer prices inching higher in the third quarter after the Reserve Bank of Australia (RBA) eased its policies over the summer.

Headline CPI came in at 0.7%, much better than the 0.5% uptick expected and the 0.4% increase in Q2 2016. Meanwhile the more closely-watched RBA weighted mean CPI inched 1.3% higher from a year earlier, matching its previous reading and missing its 1.4% expectations by a hair’s breadth.

A closer look tells us that the most significant price rises over the quarter came from fruit (+19.5%), vegetables (+5.9%), electricity (+5.4%) and tobacco (+2.3%) but is offset by declines in transport (-3.4%) and communication (-7.5%) costs.

Overall the report painted a good enough picture for market players who were worrying that the report would lead to another rate cut from the RBA. Not surprisingly, the Aussie flew higher across the board at the release.

Oil slips further – Black Crack slid lower across the board after the American Petroleum Institute (API) reported a surge of 4.8 million barrels this week, higher than the estimated 2.0 million barrel buildup. Of course, it also didn’t help that some traders were taken out of their trades below $50 after oil players priced in Iraq’s non-cooperation with any production cut deal.

Brent crude is down by 1.24% to $50.16 while U.S. crude oil prices also slipped by 1.38% to $49.27.

Overall risk aversion – Aside from falling oil prices, the Asian bourses also took cues from a weak Wall Street close. Another possible explanation is that investors who had been pricing in a good earnings season are starting to take profits ahead of the U.S. GDP release on Friday.

Australia’s ASX 200 is down by 1.53%, Hang Seng is down by 0.79%, the Shanghai Index is down by 0.51%, while Nikkei eked out a 0.09% gain amidst continued yen weakness.

Major Market Movers:

AUD – The Aussie was the star of the Asian session forex show, as upside surprises in Australia’s CPI report pushed the comdoll higher.

AUD/USD shot up by 38 pips (+0.50%) to .7683, AUD/JPY is up by 53 pips (+0.67%) to 80.19, and AUD/NZD rose by 66 pips (+0.62%) to 1.0736.

USD – The low-yielding dollar snuck in a couple of pips against its higher-yielding counterparts on the back of overall risk aversion in the markets.

GBP/USD is down by 22 pips (-0.18%) to 1.2163, USD/JPY is up by another 16 pips (+0.15%) to 104.36, and USD/CHF inched up by 5 pips (+0.05%) to .9950.

Watch Out For:

6:00 am GMT: GfK German consumer climate (10.1 expected, 10.0 previous)
7:00 am GMT: German import prices (0.1% expected, -0.2% previous)
8:00 am GMT: Italian retail sales (0.2% expected, -0.3% previous)
8:30 am GMT: BBA mortgage approvals (37.3K expected, 37.0K previous)