In Asia on Tuesday markets remained closed in China and Hong Kong. On Thursday (tomorrow) China and Australia will be out on holiday.

The focus for the session was on New Zealand, and then Australian, CPI data for Q4 2022. There is detail on these reports and market and analyst responses in the bullets above. Both sets of data came in higher than expected. Some comfort in the NZ data was in a slowing rate of non-tradeable inflation, and indeed some market analysts trimmed their terminal rate forecasts largely on this. NZD/USD slid a little lower on the session but as I update is back to the middle area of its range.

The Australian CPI rose strongly, with the headline and both measures of core (underlying) inflation well higher than consensus expectations. The key ‘trimmed mean’ measure of core inflation came in at 6.9% y/y, far above the most recent Reserve Bank of Australia forecast for it at 6.5%. Responses were almost uniform in acknowledging a +25bp rate hike at the February 7 meeting is now locked in. Some analysts had been tipping an ‘on hold’ February decision but have since changed the call to +25 based on the incoming data. Not all though. Market pricing firmed for a +25bp move.

In addition to the Q4 CPI the Australian Bureau of Statistics also published December-month CPI (i.e. CPI for that month alone, not for the quarter). This rocketed to 8.1% y/y.

AUD/USD has risen on the session, back above 0.7100.

Elsewhere across major FX we’ve had limited moves only. EUR/USD is up a few tics, as it USD/JPY. EUR/JPY is up with these moves.

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AUD/USD:

audusd wrap 25 January 2023