Daily Morning Report 27.04.2016

The Aussie slumped on weaker than expected inflation data that possible paves the way for a rate cut next month in a surprise reading of price pressures in a commodity country ahead of the Federal Reserve rate review later in the day.

Australia reported first quarter CPI figures that saw a drop of 0.2% quarter-on-quarter, compared to a 0.3% gain seen, and a 1.3% pace seen year-on-year, below the 1.8% rise expected.

Underlying inflation year-on-year – the most important number for the market and the Reserve Bank – was 1.55%, raising the chances of the RBA lowering the cash rate as soon as its May meeting.

Elsewhere, China reported March industrial profits rose 11.1% year-on-year.

USD/JPY changed hands at 111.30, down 0.01%, while AUD/USD was flat at 0.7748 ahead of inflation data.

Earlier, New Zealand said its trade balance showed a deficit of NZ$3.38 billion year-on-year for March, a bit narrower than expected.

NZD/USD traded at 0.6879, down 0.25%, after the data.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.02% to 94.43.

Overnight, the dollar remained broadly lower against the other major currencies on Tuesday, as the release of disappointing U.S. economic reports dampened demand for the greenback and as investors remained cautious ahead of the Federal Reserve’s policy statement on Wednesday.

The Conference Board reported on Tuesday that its index of consumer confidence fell to 94.2 this month from a reading of 96.1 in March, whose figure was revised from a previously reported 96.2. Analysts expected the index to inch down to 96.0 in April.

The data came after the U.S. Commerce Department said that total durable goods orders rose 0.8% last month, compared to expectations for a increase of 1.8%. February's orders were revised down to a decrease of 3.1% from a previously reported 3.0% decline.
Core durable goods orders, which exclude volatile transportation items, slipped 0.2% last month, compared to forecasts for a 0.5% increase. February's core durable goods orders had shown a 1.3% decline.

The Bank of Japan is to wrap up its two-day policy meeting on Thursday and in recent days expectations for more easing have mounted.