Australian Dollar Outlook Driven by US Dollar

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AUTRALIAN DOLLAR FORECAST: NEUTRAL

  • The Australian Dollar made a 2-month excessive on a sinking US Dollar
  • Commodities are supported on this surroundings, additional bolstering AUD
  • Will exterior components proceed to steer AUD/USD path?

AUD/USD gained over the previous week because the US Dollar took a success from inflation knowledge coming in not as sizzling as anticipated. It has damaged the topside of a three-week vary.

The weaker USD helped commodity costs transfer north with the notable exception of gold. The next US actual yield appeared to undermine the dear steel.

Industrial metals drifted larger, however it was agricultural commodities that acquired the additional increase from drought circumstances throughout Europe and North America impacting costs. This has the potential to compound the impression of the Ukraine battle on meals provide globally.

There was little Australian knowledge throughout the week, however the focus was on Chinese and US inflation figures.

Year-on-year Chinese CPI to the tip of July got here in barely decrease than anticipated at 2.7%, as an alternative of two.9% and a pair of.5% beforehand. PPI over the identical interval noticed the same consequence, printing at 4.2% relatively than 4.9% anticipated and 6.1% prior.

The results of rolling Covid-19 lockdowns throughout massive industrial centres and a problematic property sector might clarify the easing of value pressures.

Headline US CPI printed at 8.5% year-on-year to the tip of July as an alternative of 8.7% forecast and 9.1% beforehand. Core US CPI was the identical because the prior month at 5.9%, however decrease than 6.1% anticipated.

This despatched equities larger, and Treasury yields decrease. The latter appeared to sabotage the US Dollar, with markets decoding the information to permit for a much less hawkish Federal Reserve.

This was shortly hosed down by a number of Fed audio system going into the tip of the week. It ought to be famous that the subsequent Federal Open Market Committee (FOMC) assembly will likely be in late September. There will likely be one other set of inflation figures and jobs knowledge between every now and then, in addition to the annual Fed symposium in Jackson Hole, Wyoming. It is commonly used to preview the broad trajectory for coverage in the approaching 12 months.

The rally in equity costs additionally aided company bond spreads to slim. This equates to an easing of financial circumstances. As said by various Fed board members, that is the alternative of what they’re attempting to attain for the time being.

Looking forward, it will seem that the jawboning from Fed officers is prone to proceed and this could possibly be the propelling power for markets.

Domestically, Australian jobs knowledge is due out on Thursday, and this may increasingly generate some AUD/USD volatility. The final learn for the unemployment fee in June was 3.5%, a 50-year low. A Bloomberg survey has economists anticipating 3.4%.

CHART – AUDUSD, COPPER, GOLD, IRON ORE, WHEAT

AUDUSD, COPPER, GOLD, IRON ORE, WHEAT Daily Chart

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter





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