The balance of risk moved to the side of caution overnight, with the greenback gaining the upper hand against major counterparts, albeit to a small degree. US Markets kicked off in good stead assisted by better-than-expected earnings results from UBS and DuPont. A lull in Consumer Confidence data released by the conference board quickly offset the positivity derived from the earnings reports – with confidence slipping to 50.4 in July from a previous 54.3. Analysts had expected a more subdued fall to 51.
We also saw disappointing manufacturing data from the US with the Richmond Fed manufacturing index fell to a level of 16 from a previous 23. The S&P/Case-Shiller Home Price index surpassed estimates rising 4.6 percent in May from a previous 3.8 percent. US stocks finished mixed with the DOW making an unconvincing 0.12 percent rise on the day and broader S&P Index close 0.1 percent in the red.

After rising to highs of 90.7 US cents the Aussie followed US equities lower, albeit remaining buoyant above 90 US cents ahead of key CPI this morning. Interest rate speculation will once again be a primary driver of the Aussie dollar today, with the Consumer Price Index is likely to sway opinion on what the RBA will do when they reconvene in August. Consumer prices are expected to have risen 1 percent in Q2 to represent annual growth of 3.4 percent from a previous 2.9 percent.  With the RBA's target for inflation between 2-3 percent, any significant move north will likely increase the chances of a hike in August. We know the RBA have attributed headline inflation being above target due to recent tobacco tax hikes amongst other factors - the RBA however expects underlying inflation to moderate in year-end terms. It’s this underlying or core inflation data which the RBA will be watching closely. The consensus amongst economists suggests a quarterly underlying inflation reading of 0.8 percent or greater will likely increase the chances of the RBA increasing interest rates when the bank reconvenes in August. At the time of writing the Aussie is buying 90.2 US cents.