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US CPI market conniption

• US CPI. The data caused a bit of a market conniption with US bond yields & the USD jumping up. This & negative risk sentiment weighed on the AUD.• Over-reaction? We think markets may have over-reacted. Rents boosted services prices, but more broadly there are signs progress is (slowly) being made.• Event radar. Since 2015 the AUD has only traded below current levels ~1% of the time. China trade & CPI, & the MAS meeting are in focus today. US CPI inflation was in focus overnight, and the result, even though it was very close to expectations, caused a...

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US inflation in focus

• Mixed signals. Markets brushed off the hotter than expected headline US PPI, with the minutes of the last policy meeting reinforcing the Fed’s cautious stance.• USD volatility. Long-end US bond yields continue to fall as markets pare back further US Fed rate hike bets. The USD is near the bottom of its October range.• AUD holding. AUD whipped around a little overnight, but on net it is still tracking above ~$0.64 (~2% above recent lows). US inflation data released tonight. Markets were generally subdued overnight. The modest knee-jerk strength in the USD, lift in bond yields, and softness in...

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A shift in the Fed’s tone?

• Positive tone. Cautious rhetoric from Fed officials is weighing on bond yields & the USD, & boosting risk sentiment despite the Middle East conflict.• AUD ticking up. The downshift in the USD & reports China is considering a new round of stimulus is helping the AUD. The RBA’s Kent speaks today.• US data. US PPI inflation released tonight, as are the minutes of the last Fed policy meeting. The important US CPI report is due tomorrow night. Risk sentiment has remained positive with markets taking a somewhat sanguine view about the implications of the Middle East events. Oil prices...

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AUD turnaround

• Risk-off/risk-on. Oil rose ~4%, but the firmer USD & dip in equities unwound overnight. Developments & Fed comments weighed on US rates.• AUD rebound. A weaker USD & improved risk sentiment boosted the AUD. Australia’s position as a net energy exporter is also AUD supportive.• AU data. Cons. confidence & bus. conditions due today. Population growth is somewhat offsetting the impact on the economy from higher rates. Events in the Middle East continue to dominate the headlines with the conflict still raging and the implications of the increased geopolitical risks across the region still being worked out. However, in...

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Geopolitical tensions

• Middle East. Developments look set to hang over markets at the start of the new week. The USD, JPY & oil are typically supported by this type of unrest.• US jobs. Payrolls exceeded forecasts, but the underlying detail wasn’t as rosy. Markets were volatile around the data. US CPI released on Thursday.• AUD cross-currents. More negative risk sentiment can exert a bit of pressure on the AUD. But softer US inflation can offset this later in the week. The tragic weekend developments in the Middle East look set to hang over markets at the start of the new week....

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