The market landscape might just be very different by this time tomorrow.  Today’s CPI data and the US Fed meeting  early tomorrow morning both have the potential to materially change market thinking on the outlook for interest rates.

Minutes of the last RBA meeting released on 19 July have firmed up market expectations that rates will be cut next month unless today’s inflation data is stronger than necessary. This has seen the ASX 200 continue to nudge higher as investors chase yield. Recent buying leaves the Australian market vulnerable to stronger than expected data today.  Today’s CPI data is by no means a one way risk, however. Weaker than expected data could firm expectations for 2 more rate cuts by the RBA and see stocks pushed higher by the relentless chase for yield.

Profit taking in Woolworths yesterday put a quick end to the rally that followed its trading update. Recent market action reflects clear differences between those investors prepared to back the new Banducci/Cairns management team and those that remain cautious prior to release of the next profit report.