AUD Takes Hit As CPI Data Inspires RBA Re-Pricing, Earnings Reports Buoy Risk

Risk sentiment improved on the back of decent earnings reports from two U.S. tech giants (Microsoft & Alphabet), which pushed e-mini futures higher. This sapped some strength from traditional safe havens such as the USD, JPY and CHF.

• Sales of Aussie dollar stole the limelight later in the session, as the market dialled back expectations of an outsized rate hike from the RBA in response to Australia's quarterly CPI data. Modest pricing of a 75bp rate rise in August was reduced to zero as headline annual inflation missed, even as the trimmed mean topped estimates. When this is being typed, the market prices a ~79% chance of a 50bp hike next month.
• AUD weakness spilled over into the kiwi dollar to an extent, as New Zealand's headline flow failed to provide much in the way of notable catalysts. AUD/NZD probed the water below NZ$1.1100 amid a drop in Australia/New Zealand 2-year swaps spread.
• While Australian inflation data influenced price action in Asia, risk relief remained evident in the European FX bloc. NOK led the Scandies higher, outperforming all of its major peers, while EUR was the second-best performer in G10 FX space despite familiar risks to the Eurozone's economic outlook.
• The key risk event today is the announcement of the FOMC's monetary policy decision, with firm consensus for a 75bp hike shifting focus to the statement and comments from Fed Chair Powell.
• Post-Asia data releases include U.S. durable goods orders, wholesale inventories & pending home sales.