AUD slides on Australia's Q3 CPI; RBA's preferred measures fall

The AUD slid in Asian trading on Australia’s inflation data. The headline number came in bang in-line at a 0.6% q/q rise and 3.5% compared to a year ago, while the RBA’s trimmed mean reading (its preferred measure of inflation) eased back to 0.3% q/q, 2.3% y/y from 0.8%/2.6% last time - both below expectations. Otherwise, a Singapore holiday kept markets relatively muted.

There were, however, a few anomalies in the Aussie data with most of the fall in the trimmed mean CPI coming from a hefty fall in health costs (1.0% q/q) and there were only falls in 2 out of the 11 major CPI groups with some (clothing and housing) registering increases of over 1%.

Yesterday’s session was a one for trading the headlines with EU meetings news introducing marked volatility. The EUR was attempting new cycle highs as news broke that today’s meeting of EU finance ministers had been cancelled and resulted in a sharp 100 point fall until it was noted that the EU leaders’ summit was still going ahead. EUR regained the 1.39 handle versus the dollar but struggled to regain the highs as EU sources cautioned that the summit is unlikely to provide concrete numbers for the debt crisis. Now we wait for the actual announcement, with minimum expectations.

Elsewhere, the Bank of Canada was quite downbeat on the economic outlook, shaving growth forecasts and removing parts of the accompanying statement that related to the need for removing stimulus measures. The CAD weakened after a brief foray sub-parity versus the US dollar, finishing the session as one of the worst performers.

On the data front there was no encouraging news for US homeowners with S&P/CaseShiller House Prices declining for the eleventh straight month, falling 3.8% y/y in August. Consumer confidence was also weaker, falling to its lowest level since March 2009 while the expectations component of the index remains soft. The Richmond Fed manufacturing index came in below forecast at -6, unchanged from the previous month with employment trends down but new orders up. Wall St was battered by the EU headlines, soft data and poor earnings/update announcements. The DJIA closed down 1.74%, S&P -2.0% and Nasdaq -2.26%.

Economic Data Highlights

• CA Aug. Retail Sales out at +0.5% m/m vs. 0.3% expected and revised -0.5% prior
• US Aug. S&P/CaseShiller House Prices out at -3.8% y/y vs. -3.5% expected and revised -4.21% prior
• US Oct. Consumer Confidence out at 39.8 vs. 46.0 expected and revised 46.4 prior
• US Aug. FHFA House Price Index out at -0.1% m/m vs. +0.2% expected and revised flat prior
• US Oct. Richmond Fed Manufacturing Index out at -6 vs. +1 expected and -6 prior
• NZ Oct. NBNZ Activity Outlook out at 26.1 vs. 35.4 prior
• NZ Oct. Business Confidence out at 13.2 vs. 30.3 prior
• AU Q3 CPI out at +0.6% q/q, +3.5% y/y, both as expected, vs. +0.9%/+3.6% prior resp.
• AU Q3 RBA Trimmed Mean CPI out at +0.3% q/q, +2.3% y/y vs. 0.6%/2.7% expected and revised 0.8%/2.6% prior resp.

Upcoming Economic Calendar Highlights
(All Times GMT)

• GE Import Price Index (0600)
• Sweden Trade Balance (0730)
• UK CBI Surveys (1000)
• US MBA Mortgage Applications (1100)
• US Durable Goods Orders (1230)
• CA Teranet/National Bank House Price Index (1300)
• EU ECB’s Coene to speak (1330)
• EU ECB’s Stark to speak (1400)
• US New Home Sales (1400)
• EU ECB’s Mersch to speak (1500)