Aussie regains ground after CPI, dollar treads water

The Australian dollar regained some ground in the Asian session today after stronger-than-expected monthly CPI data. In the background, market sentiment is also stabilizing after Fed Chair Jerome Powell refrained from commenting on monetary policy or inflation. The New Zealand dollar is currently the second strongest, followed by the Swiss franc. The Yen is the worst performer, followed by the Canadian and then the Dollar and the Euro. Sterling is mixed for now.

Technically, the dollar’s sell-off has clearly lost momentum so far this week, but there are no signs of a sustained recovery just yet. Traders are likely to just hold their bets ahead of tomorrow’s US CPI release. Gold rally is still on track 100% forecast 1616.51 – 1786.63 from 1728.48 at 1898.80. Given the weak upside momentum on the 4-hour MACD, the 1900 grip could end on the first try to the upside and prompt a pullback. That could give the dollar a chance to rally elsewhere.

In Asia, the Nikkei is up 0.98% at the time of writing. The Hong Kong HSI is up 1.02%. China Shanghai SSE is up 0.20%. The Singapore Strait Times is up 0.29%. Japan 10-year JGB yield fell -0.0074 to 0.504. Overnight, the DOW rose 0.56%. The S&P 500 rose 0.70%. NASDAQ rose 1.01%. The 10-year yield rose 0.104 to 3.621.

Fed Bowman: Rates will remain at sufficiently restrictive levels for some time

Fed Governor Michelle Bowman said in a speech“In recent months we’ve seen some inflation measures fall, but we still have work to do, so I expect the FOMC to continue raising interest rates to tighten monetary policy, as we explain after our December meeting to have. ”

“My views on the appropriate size of future interest rate hikes and the final level of the Federal Funds Rate continue to be guided by the incoming data and their impact on the outlook for inflation and economic activity.”

“I will look for compelling signs that inflation has peaked and more consistent signs that inflation is on a downward path to determine both the appropriate size of future rate hikes and the level at which the policy rate should be raised is sufficiently restrictive.”

“My expectation is that once we achieve a sufficiently restrictive federal funds rate, it will need to stay at that level for some time to restore price stability, which in turn will help create conditions that support a sustained strong labor market .”

ECB Centeno: Inflation will fall again from March

ECB Governing Council member Mario Centeno said yesterday: “We are nearing the end of the current rate hike process, I think that’s right.”

Centeno said that “wage updates in Europe could make it difficult for prices to fall further over the next two months” but “after that, inflation will start falling again from March”.

BoJ Public Survey: 32.5% expect a significant price hike vs. 28.9%

According to the BoJ’s December survey of public attitudes and behavior, 32.5% of respondents expect prices to rise significantly in a year from 28.9% in the September survey. Those expecting prices to rise fell to 52.5% from 56.8%. Combined, those who expected prices to rise fell to 85.0%, down slightly from 85.7%. Only 2.4% expect falling prices.

Regarding the state of the economy in a year, those expecting an improvement fell from 10.5% to 9.1%. Those expecting unchanged fell to 44.4% from 46.0%. Those expecting worsening conditions rose to 46.2% from 42.9%. DI fell from -32.4 to -37.1.

Australia’s monthly consumer price index rose back to 7.3% yoy in November on continued inflationary pressures

Australia’s monthly CPI accelerated to 7.3% yoy in November from 6.9% yoy, ahead of expectations of 7.2% yoy.

Michelle Marquardt, Head of Prices Statistics at ABS, said: “The annual move of 7.3% this month compares to 6.9% in October and 7.3% in September, suggesting continued inflationary pressures.”

The main contributors to the annual increase in November were housing (+9.6%), food & non-alcoholic beverages (+9.4%), transport (+9.0%), furniture, appliances & services (+8.4% ). Leisure and culture (+5.8%).

Retail sales in Australia rose 1.4% mom in November on Black Friday sales

Retail sales in Australia rose 1.4%m/m in November, well above expectations of 0.7%m/m. Seasonally adjusted sales of AUD 35.92 billion were a new record.

Ben Dorber, Head of Retail Statistics at ABS, said: “While we typically see an increase in spending around Black Friday sales, the strong seasonally adjusted increase in November 2022 shows that the effect is increasing over time as the event has become more common everywhere retailers and sale times are getting longer.”

“With Black Friday sales rising in popularity, October’s slower spike could indicate consumers are waiting to take advantage of November’s discounts, especially amid downward pressure on the cost of living.”

looking ahead

Italy’s retail sales and US crude inventories are the only features on another ultra-light day.

AUD/USD daily report

Daily Pivots: (S1) 0.6859; (P) 0.6894; (R1) 0.6927; More…

AUD/USD intraday bias remains neutral as consolidation extends from temporary top at 0.6949. Prospects remain bullish as long as 0.6721 support holds. The break of 0.6949 will continue the larger rise from 0.6169 to 61.8%, the projection from 0.6169 to 0.6892 from 0.6721 to 0.7444 next. However, a firm break of 0.6721 will indicate a short-term reversal and turn the bias back down.

Overall corrective decline from 0.8006 (2021 high) should be complete with three waves down to 0.6169 (2022 low). Further recovery should be watched until the 61.8% retracement from 0.8006 to 0.6169 at 0.6871. A sustained break there will open the way for a retest of 0.8006. This will now remain the preferred case as long as 0.6721 support holds.

Update of economic indicators