Aussie lower, unmoved by budget
The Australian and New Zealand dollars reversed at the recent highs overnight with markets more cautious ahead of tonight’s US inflation report.
The AUD/USD fell 0.3% as the major technical resistance at the three-month highs at 0.6800 continued to put a halt to any further advance.
The AUD saw little impact from last night’s Federal Budget as the Labor government announced an AUD4.2bln surplus – the first surplus since Peter Costello’s days as Treasurer – along with AUD15bln in income support to help the cost-of-living crisis.

Kiwi gains in Europe
The New Zealand dollar was also weaker.
The NZD/USD is having similar difficulties moving above the three-month highs at 0.6350 with the pair down 0.2% overnight.
The kiwi is doing better in Europe as the euro notably gives back some of its recent gains.
The euro fell after last week’s European Central Bank decision. The ECB raised by only 25 basis points and markets now expect only one more rate hike from the ECB.
The NZD/EUR was up 0.2% overnight and is now up 4.6% over the last ten trading session.
The AUD/EUR has also been stronger.

US inflation due
Tonight all eyes will be on the US inflation report due at 10.30pm AEST.
The market expects headline inflation in annual terms at 5.0% with core at 5.5%.
Importantly, core inflation remains stuck above 5.0%. This is similar to other major economies – while headline has fallen, core remains elevated.
If core remains high, central banks might need to hike rates further, potentially destabilising the recent strong rally in equities markets.

Aussie, kiwi reverse from resistance
Table: seven-day rolling currency trends and trading ranges

Key global risk events
Calendar: 8 – 12 May

All times AEST
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