AUD jumps on strongest inflation in four years- 23/07/2014



The US Dollar Index (DXY) keeps on rising, but after yesterday’s move, the market is at a slight corrective moment and trading at 80.77, down by -0.02%, and waiting for another bullish flow. The US Consumer Price Index report was the trigger event despite not being that much of a surprise. CPI (YoY) was in line with consensus, at 2.1% in June. Only data excluding food and energy came in below expectations, at 1.9% instead of 2.0% (YoY) and 0.1% instead of 0.2% (MoM). Today’s economic calendar will be very light, but conflicts in the Mideast and Ukraine could still push the US Dollar higher on investors’ flight for safe havens and US Treasury bills.

At the moment, the Dollar is up against the SEK (0.04%), flat against the NOK and the HKD, while lower against most as investors take profits. The greenback is down against the EUR by 0.01%, against the JPY by 0.04%, the GBP by 0.03%, the CHF by 0.02%, but the two big losses are against the Australian Dollar, by 0.40%, and the New Zealand Dollar, by 0.14%.


The Australian Dollar is the big mover of the day as the inflation report pushed the market to a two-week high. The trimmed CPI data revealed that inflation accelerated to its fastest pace in four years, at 2.9% (YoY), but the QoQ data came in at 0.5%. To explain the Australian Dollar rally post-CPI data, experts commented. CBA wrote that the CPI is “a warning sign that the inflation backdrop is not as benign as markets want to price in at the moment”, and Stephen Koukoulas said “inflation is probably slowing and one-offs have been pushing those annual figures higher”.

The AUD is trading higher against the JPY (+0.35%), the USD (+0.39%), the EUR (+0.40%), the GBP (+0.38%), the CAD (+0.35%), the CHF (+0.39%), and the NZD (+0.25%).


The Japanese Yen is mostly higher today, exception made against the AUD and NZD. The BoJ Deputy Governor Nakaso said that reaction to sales tax increase is within expectations, but as it affects household income, the central bank must watch over its impact on consumption. In regard to liquidity added by the BoJ in the last year, Nakaso said that the BoJ is experienced in exit strategy from 2006 and know how to withdraw liquity. When questioned about an imbalance in Japan’s stock market, he didn’t agree.

JPY is up against the USD (0.04%), the EUR (0.05%), the CHF (0.06%), the GBP 0.04%, and the SEK (0.22%), while losing the battle against the AUD (0.38%) and the NZD (0.07%).




Equity markets were up yesterday, with the S&P 500 higher by 0.50%, the Nasdaq by 0.71%, and the Dow Jones by 0.36%. Futures for the German DAX 30 and the UK FTSE 100 are signaling a higher opening today ahead of EMU consumer confidence and tomorrow’s Markit PMI data in Europe.



Crude Oil

WTI crude oil is trading flat as it doesn’t seem able to break above the 50-day simple moving average and is stuck between the 50 and 200-day MAs, waiting for a trigger event. Yesterday’s and today’s downside pressure are due to an industry report that showed gasoline supplies expanded in the U.S., the world’s biggest oil consumer.


Gold fell yesterday to $1302 and could retest the $1300 psychological level and the July-16 low at $1291. As demand for the Dollar rose, the precious metal priced in Dollars eased its value in USD.

Wild Card


Bitcoin is always a wild card even with the range trading seen in July. Now with the New York State close to regulate cryptocurrency businesses, the market is both disgusted and cheerful. Some believe the digital currency can’t survive regulation, others say it will become mainstream, and others say Bitcoin will be able to go around regulation and maintain its principles. Nevertheless, it’s a very interesting market, now with a ex-Goldman Sachs trader getting on board to fill Mt.Gox void.