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AUD back in focus ahead of CPI data

Four markets in focus today: AUD/USD, USD/JPY, BHP Billiton and GBP/USD.

AUD/USD

The pair continues to hold its ground a touch above 0.88 heading into today’s CPI data. The headlined reading is expected to show a quarterly rise of 0.4% which translates to an annual rise of 2.4%. Inflation remains a concern locally and given the disappointment we’ve seen in other key metrics of the local economy like jobs, there is a strong chance the data might fall short at 11.30 AEDT. Meanwhile we also have Westpac consumer confidence data due out at 10.30 AEDT. All these readings put the AUD into focus with potential for AUD/USD to be sold into strength or on momentum lower being the most likely scenario. To the upside look out for moves into the 0.885 region, December lows, for fresh selling. To the downside, momentum plays on a drop below 0.88 could see the selling accelerate.

USD/JPY

The pair continues to find buyers on dips below 104 heading into the BoJ meeting. Most analysts don’t expect any changes in this meeting with a slight potential for upward revision to core inflation forecasts. With the sales tax hike set to kick in in April, we might hear some commentary around the impact of this change and proposed action to counter it. There could also be some pressure on the BoJ to act in order to prevent derailing the recovery. I remain in favour of buying dips in the pair.

BHP Billiton

The iron ore giant posted its second quarter output today and at first glance the report looks mildly weaker. Iron ore output was up 16% to 48.9Mt while the market was expecting 49.3Mt. Petroleum output was 57.7 Mmboe which was well below estimates of 60.2 Mmboe.  We had seen BHP push through 38 over the past week but this report is likely to see it retreat today. BHP’s ADR is pointing down 0.8% at 37.63 while iron ore fell again overnight to 123.20.

GBP/USD

The pound is quite elevated against the greenback heading into some key data. At 20.30 AEDT we get claimant count change, MPC asset purchase facility votes, unemployment rate, average earnings and public sector borrowing data. Any indications of further strength in the UK economy could see the pound continue its run and cable could trade back to 1.65.

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