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FOREX: AUD Marked Higher, USD Index Keeps Pressure on Japan

FOREX
  • AUD is comfortably the best performer across G10, rising against all others on the back of a stronger-than-expected CPI print overnight. Y/Y inflation for May came in 0.2ppts ahead of expectations at 4.0%, reigniting market speculation that the RBA's next step could be a rate hike - or at least a protracted period of restrictive policy - rather than a rate cut.
  • AUD/USD was marked higher to 0.6689 in response, with AUD/NZD a particular standout - the cross has rallied well north of the 1.09 handle for the firtst time since mid-May and taken out resistance at the 1.0884 50-dma in the process. The opens a further reversal higher in the cross, which would initially target 1.0961 ahead of 1.1000.
  • The greenback has firmed further off yesterday's low, but the USD Index remains short of the first intraday level at 105.915. Strength through here would pile more pressure on the JPY, as USD/JPY continues to press toward Y160.00. The spot JPY TWI is again lower and keeping focus on any possible intervention response - today's low put the currency again at its weakest in decades.
  • Focus for the remainder of Wednesday trade is on May New Home Sales data as well as speeches from ECB's Rehn, Panetta, Lane and Kazaks. There is no Fedspeak of note. 
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