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For a second day in a row, the major currencies stayed chill during a relatively light Asian session trading.

The Aussie and Kiwi didn’t get the memo, however, as a data miss and a bit of risk aversion hit the comdolls.

  • AU Q2 2018 CPI prints at 0.4% vs. 0.5% expected, 0.4% previous
  • AU trimmed mean CPI stays at 0.5% as expected

Major Events/Reports:

Australia’s inflation release

A report printed by the Australian Bureau of Statistics (ABS) showed consumer prices rising by 0.4% in Q2 2018 against expectations of a 0.5% uptick and Q1’s 0.4% increase. That’s the SEVENTH consecutive quarter that headline CPI missed analysts’ expectations!

Meanwhile, annualized prices shot up by 2.1%, a tad lower than the 2.2% uptick that markets had expected but also marks the fastest price increase since Q1 2017.

A closer look tells us that most of the price increases came from items such as fuel, electricity, and tobacco. Discretionary goods such as clothing and footwear, and furniture and household equipment remain subdued.

Tradable prices (which accounts for around 40% of the CPI basket) grew by 0.5%, faster than the 0.3% increase in non-tradable items.

Finally, the trimmed mean CPI – key to RBA’s policy decisions – came in at 1.9% as expected while the weighted mean CPI also shot 1.9% higher against a 2.0% increase in March.

Analysts will now be looking at wage price increase due in mid-August. If you recall, the RBA recently shared its concerns about household debt outpacing household wages and creating an unfriendly consumer spending environment.

PBoC sets yuan above 6.8

China’s central bank is at it again! Earlier today the People’s Bank of China (PBoC) set its yuan mid-point reference at 6.8040, higher than yesterday’s 6.7891 setting.

If you recall, analysts are betting that China is using a weak currency to combat the U.S.’ latest (and future?) set of tariffs. The PBoC’s move drew concerns over the stability of China’s economy, but that didn’t stop Chinese bourses from taking risks anyway.

Mixed market reactions

No fresh catalyst popped up during the Asian session, so market players mostly took their cues from the previous sessions’ risk appetite from upbeat earnings.

  • Nikkei is up by 0.46% to 22,613.0
  • A SX 200 is down by 0.62% to 6,234.6
  • Shanghai index is up by 0.09% to 2,908.143
  • Hang Seng is up by 0.80% to 28893.1

Commodity prices moved to their own beat. Dollar weakness from the previous trading sessions and ahead of the Trump-Juncker meeting in Washington kept gold afloat. Meanwhile, oil prices continued to climb after a U.S. crude oil inventories fell more than expected last week.

  • Spot gold is down by 0.06% to $1,223.81
  • Brent crude oil is up by 0.27% to $73.92
  • U.S. WTI is up by 0.07% to $68.69

Major Market Mover(s):

AUD

The Australian dollar was hit by a one-two punch of a surprisingly weak Australian CPI and concerns over China’s economy after the PBoC further devalued the yuan.

AUD/USD is down by 24 pips (-0.24%) to .9734; AUD/JPY is down by 18 pips (-0.21%) to 82.31; AUD/CHF is down by 17 pips (-0.23%) to .7353; EUR/AUD is up by 46 pips (+0.29%) to 1.5792, and GBP/AUD is up by 55 pips (+0.31%) to 1.7769.

NZD

New Zealand didn’t print any economic report, but overall risk aversion and concerns over China’s economy also weighed on the Kiwi.

NZD/USD is up by 10 pips (+0.14%) to .6790; NZD/CAD is down by 6 pips (-0.07%) to .8938; GBP/NZD is up by 29 pips (+0.15%) to 1.9351, and EUR/NZD is up by 22 pips (+0.13%) to 1.7199.

Watch Out For:

  • 8:00 am GMT: Credit Suisse economic expectations
  • 8:00 am GMT: Germany’s Ifo business climate (101.6 expected, 101.8 previous)
  • 8:00 am GMT: Euro Zone’s private loans (y/y) to remain at 4.0%?
  • 10:00 am GMT: U.K. CBI realized sales (16 expected, 32 previous)