Australian Dollar Outlook (BELL FX, Rivkin Securities, CMC Markets): Slightly lower overnight by 0.17% $1.0258, the Australian dollar has been trading marginally higher at $1.0267 (8:50 AEST) at the start of this morning's auction against the US dollar.
With strong international institutional demand for yield, stronger than expected inflation data could provide a good entry point for institutions to buy Australian dollar assets, given the dollar is well below its April high of 1.0582, Rivkin Securities global analyst Tim Radford.
The Australian Dollar has firmed overnight following it's languishing to a six-week low in recent days, according to Bell FX Securities FX Dealing strategist Leanne Terrett.
Australia: Bell FX said that in the past 12 months, the pattern for the AUD once it has retraced to these levels is for it to find decent support and push back higher.
Analysts are keen to point out that the interest rate differential and AAA rating is holding it firm with support institutions and central banks for now.
The AUD slightly staggered yesterday after the disappointing Chinese manufacturing data, but overnight recovered as written.
"The key for the AUD today will be the release of Q1 CPI. The risk is a low-side surprise which would see the market ramp up expectations for a cut at the RBA's May meeting (currently priced at 29%)," adds Ms Terrett explains.
While inflation remains subdued, the CPI alone is unlikely to prompt a further RBA rate cut in May, as we need much weaker activity data for the RBA to cut again.
Australia's inflation rates, is expected to move higher at 0.7% from the last quarter, which would be interpreted as remaining 'in check'. If the data comes in considerably lower than this, it is likely the RBAs easing bias will intensify given the recent spate of soft economic data, CMC Markets chief market analyst Ric Spooner points out.
Mr. Spooner explains that in turn, this may provide another shot in the arm for the market, particularly higher yielding equities like the banks and consumer staples.
"On the flip side, if the CPI data comes in higher than expected, a rate cut would appear less likely in the near term, and we may see some of the early gains erased as a result," adds CMC Markets chief market analyst.
RBA Deputy Governor Philip Lowe will speak about "The Journey of Financial Reform" at 14:40AEST today but this is unlikely to be market moving.
DEEWR's new job ads series for March is released at 11:00AEST which should corroborate the ongoing softness in the ANZ and SEEK job ads measures.
There will not be a Daily FX Report tomorrow due to the ANZAC day public holiday in both Australia and New Zealand.
Majors: Currency pairs continue are having a better week of things thanks to a broader risk-off tone by surprisingly benign European financial markets.
Whilst global data remains on the soft side, with the European PMI's last night and China HSBC PMI (see above) yesterday generally surprising on the downside, speculation of an imminent ECB rate cut drove a strong rally in European banking stocks and a further narrowing in peripheral euro zone bond spreads.
Offshore, the German IFO for April tonight is not expected to deviate much from the March results, while US durable goods orders are expected to fall around 3% in March after the solid 6% gain in February.