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Most currency pairs were range-bound yet again during today’s Asian session. And like yesterday, Aussie and Kiwi pairs were an exception yet again. This time, however, the two currencies were in a race to the top, thanks to the risk-on vibes and the commodities rally during the session.

  • Chinese CPI y/y: 1.2% vs. 1.1% expected, 0.9% previous
  • Chinese PPI y/y: 6.4% vs. 6.8% expected, 7.6% previous
  • Japanese leading indicators: 105.5% as expected, 104.8% previous

Major Events/Reports:

Mixed inflation data from China

China’s official CPI printed a 1.2% year-on-year increase in April, beating expectations for a 1.1% rise. This is the best reading in three months and also marks the second consecutive month of improving annual readings.

Looking at the details, seven out of eight CPI components printed increases, with the “food and tobacco” component’s 1.8% decline being the only drag.

China’s CPI reading may look good, but it should be noted that CPI is actually in recovery mode after plunging from January 2017’s +2.5% reading.

Also, China’s official PPI continued to ease from February’s multi-year high of +7.8%. As of April, PPI only increase by 6.4% year-on-year, which is the weakest annual reading in four months. And this may soon begin to reflect on headline CPI.

Iron ore recovers

After getting beaten to a pulp since last week, Dalian iron ore managed to stage a recovery during today’s Asian session, rising by 1% to 467 yuan per dry metric ton.

Market analysts can’t really find a fundamental reason for the iron ore recovery itself. However, they do point out that steel prices have also recovered, thanks to the ongoing crackdown in China, which market players think will result in dampened supply. And the recovery in Chinese steel prices, in turn, gave iron ore prices a lift.

Commodities rise

Iron ore and steel weren’t the only commodities that were on the rise during the Asian session.

Precious metals were up.

  • Gold was up by 0.55% to $1,222.79 per troy ounce
  • Silver was up by 0.96% to $16.221 per troy ounce

Base metals, meanwhile, were mixed but mostly in the green.

  • Copper was up by 0.20% to $2.501 per pound
  • Zinc was up by 0.26% to $2,619.50 per dry metric ton

As for oil benchmarks, they were well-supported.

  • U.S. crude oil was up by 0.61% to $46.16 per barrel
  • Brent crude oil was up by 0.47% to $48.96 per barrel

Expectations that supply would dwindle amid China’s crackdown were cited, but the fact that the U.S. dollar index was down by 0.14% for the day was also likely a factor. After all, a weaker dollar means that globally-traded commodities that are priced in U.S. dollars would be relatively cheaper.

Risk-taking in Asia-Pacific

Most equity indices in the Asia-Pacific region were in the positive territory today.

  • Australia’s ASX 200 was up by 0.60% to 5,874.90
  • New Zealand’s NZX 50 was up by 0.16% to 7,424.20
  • The Shanghai Composite was up by 0.02% to 3,080.80
  • Hang Seng was up by 0.95% to 25,125.50
  • The Nikkei Index was up by 0.28% to 19,899.50

The basic materials sector and energy shares outperformed, so the equities rally and generall risk-on mood was likely underpinned by the commodities rally. However, some market analysts also point to strong corporate earnings.

Major Market Mover(s):

AUD & NZD

The Aussie the the Kiwi were the main losers in yesterday’s Asian trading session. In today’s session, however, they ended up as the winners. And Aussie and Kiwi bulls can probably thank the commodities rally and general risk-on vibes for that.

Between the two, it was clear that the Aussie had the winning edge since AUD/NZD was up by 14 pips (+0.14%) to 1.0661.

AUD/USD was up by 25 pips (+0.34%) to 0.7366, AUD/JPY was up by 35 pips (+0.43%) to 83.82, AUD/CHF was up by 22 pips (+0.31%) to 0.7413

NZD/USD was up by 14 pips (+0.21%) to 0.6908, NZD/CAD was up by 19 pips (+0.20%) to 0.9469, NZD/JPY was up by 22 pips (+0.28%) to 78.61

Watch Out For:

  • 6:00 am GMT: German industrial production (-0.6% expected, 2.2% previous)
  • 6:00 am GMT: German trade balance (€21.2B expected, €21.0B previous)
  • 6:45 am GMT: French government’s budget balance (-€21.5B previous)
  • 8:00 am GMT: Italian retail sales (0.2% expected, -0.3% previous)
  • 9:30 am GMT: Australia’s annual budget will be released