From the FXWW Chatroom: Ahead of tomorrow’s Australian 2Q CPI reading (9.30am HKT, 2.30am LDN, 9.30pm NY) and RBA Gov. Philip Lowe’s speech (11.05am HKT) – the AUD has strengthened the most of the G10 complex (0.7945 highs +0.25%) with the options market also indicating that the next 24-hours could be one of the most important days of 2017 for the AUD. Despite 1m (8.85% Vol) tenors and beyond holding steady, AUDUSD O/N vol is at 19.5%, the second highest in the past year (~81bp breakeven). Additionally, we see a similar story in AUDNZD where demand for optionally far outstrips the supply: AUDNZD O/N vol at 19.0 is highest in the past year ~ 79bps breakeven. BofAML’s Australian Economics and Strategy teams expect a 2.3% headline print, edging closer towards the middle of the RBA’s 2-3% target band from 2.1% yoy but note there are risks to the forecast largely stemming from the declines in oil prices and assumptions on food and vegetable inflation. This only increases the importance of RBA Gov. Lowe’s speech that will follow the release and risks further attempts to walk back what may have been a misinterpretation of the RBA minutes last week, already attempted by Deputy Gov. Debelle on Friday. That being said, the strong labour market release last week makes it more likely Lowe will underline a more upbeat outlook on at least the employment growth.
View the latest market information in the FXWW Chatroom with a free trial.