FX round-up: Aussie recovers from overnight weakness after CPI falls short
The Aussie lost some ground against the US dollar in overnight trading as figures showed quarter-on-quarter inflation missed expectations of 0.4% with a print of just 0.2%.
As soon as the figure was released, AUD/USD moved lower from 0.7926 to 0.7906. The push lower was compounded by comments from Reserve Bank of Australia governor Philip Lowe, suggesting that rising inequality could erode the political centre.
By the end of the Asian session, AUD/USD had hit a low of 0.7878. During the UK trading session, traders took the pair back up to hit a day high of 0.7934 by 1500 BST.
The lower inflation figure poured cold water on any rate hikes in the near future, but since the RBA is the only central bank that has not yet implemented any form of quantitative easing and maintains a comparatively high interest rate of 1.5%, it is fair to say that it still has scope to apply a "wait and see" approach. This was confirmed by comments from Lowe, who said central the bank does not have to move "in lockstep with other central banks".
The UK saw the release of the preliminary second quarter GDP figure which met analyst expectations of 0.3%, up from a revised figure of 0.2% for the last quarter.
This seemed to give market participants the confidence they needed to take cable to a day high of 1.3067 by 1600 BST, just shy of the 10-month high of 1.3084 hit yesterday.
New home sales out in the US also added some steam to the move, coming out worse than expected at 610,000, missing forecast expectations by 5,000.
EUR/USD stalled in Wednesday trading after hitting Tuesday's two-year high of 1.1710. Technical traders could have had this area in their sights as a good level to take some profits after the somewhat meteoric rise the single currency has seen against the dollar since the start of the year, where it was trading at 1.0342.
Price movement for the pair was largely rangebound for the day, opening at 1.1639, with a day low of 1.1613 and a day high of 1.1655 by 1400 BST.
All eyes will now turn to the FOMC statement release due at 1800 BST for clues on any policy changes from the US Federal Reserve. Although no changes are expected, traders will be analysing the statement to pick up on any key drivers the Fed is looking for when it comes to setting rates.
- Reporting by Imran Allana