A$ Knocked By Higher US Yields Post CPI, But Firmer Equities Help Contain Fallout

AUD/USD was volatile through the US CPI print. We initially rallied towards 0.6640, before retracing to 0.6580/85 (which is also around the 200-day EMA). By the end of the NY session we were back closer to 0.6600, which is where we currently track in early Wednesday dealings. This left us down moderately for Tuesday's session (-0.12%), as the USD rose against most of the G10 currencies.

• The US higher than hoped for CPI inflation data weighed on rates, as projected rate cut pricing receded. The data is unlikely to provide the FOMC confidence of inflation returning to 2% in the near term. US cash Tsy yields finished higher across the curve (+5 to +6bps).
• This aided broader USD gains, although equity sentiment was still firm in US markets, with the SPX up +1.12%. EU markets also rallied. This likely contained the fallout for the A$, indeed the currency outperformed the yen, with AUD/JPY holding near 97.50/55, up from recent lows around 96.90/00.
• Aggregate commodity indices were mixed, the headline Blomberg index down a touch, but the base metals index rose 0.26%. Iron ore is struggling to rebound though, back near $107.35/ton.
• On the data front today we have Feb CBA household spending. The data calendar is then empty for the rest of the week.
• Note in the option expiry space, the following NY cut later: $0.6600(A$584mln), $0.6640-50(A$1.3bln), $0.6680(A$1.3bln)