A$ Weakens On Risk Appetite Deterioration, Q1 CPI The Focus

Flight to quality flows hurt the Aussie and it underperformed the G10, except NOK. The USD index rose 0.5% as equities sold off. AUDUSD has started Wednesday around 0.6631, off Tuesday’s low of 0.6614, ahead of important CPI data.

• AUDUSD broke through support at 0.6620, the April 10 low, on Tuesday but is now trading just above. Clearance of this level represents a bearish development and opens 0.6565, the bearish trigger.
• With the pullback in risk sentiment helping the yen, AUDJPY reached a low of 88.26 on Tuesday, the lowest since April 10. It is currently around 88.69. AUDNZD continued trending down and reached an intraday low of 1.0779 yesterday. It is now about 1.0789. AUDEUR is down 0.4% to 0.6040 and AUDGBP -0.4% to 0.5343.
• Equity markets were generally weaker with the S&P down sharply by 1.6% and the Eurostoxx -0.5% but the DAX +0.1%. The VIX rose almost 2pp. Weaker risk appetite also hurt the commodity space with WTI oil prices down 1.9% to $77.20. Copper prices are 2.6% lower and iron ore broke $100/t briefly on Tuesday and is currently trading just above.
• Today Q1/March CPI data prints and is expected to confirm that inflation peaked in Q4 last year. Headline is forecast to rise 6.5% (Q4 6.8%) and trimmed mean 6.7% (Q4 6.9%). See Q1 CPI Data To Ease, Watch Domestic Components for more detail.