AUD/USD: RBA weighs stagflation risks – Commerzbank

FXStreet Insights Team FXStreet

Commerzbank economists Dr. Henry Hao and Moses Lim note AUD/USD slipped to 0.6950 as Australia faces a stagflationary dilemma. Pre-war core inflation held at 3.3% while a Middle East energy shock could push prices higher. With confidence and services PMIs weakening, markets still price a 54% chance of a Reserve Bank of Australia rate hike in May.

RBA caught between inflation and growth

"AUD/USD fell 50 pips to 0.6950. The AUD's resilience is partly due to lingering hawkish bets as the Reserve Bank of Australia (RBA) confronts a severe stagflationary dilemma."

"While Australia's pre-war February core inflation was unchanged at 3.3%, the unfolding Middle East energy shock threatens to steepen the inflation trajectory in the coming months."

"On the other hand, consumer confidence already plunged to record lows while services PMIs flipped into contraction."

"The RBA will carefully weigh recession risks against the need to contain price spillovers from surging fuel costs, keeping markets pricing a 54% probability of a rate hike in May."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold: Gains remain capped by $4,400

Gold regains composure and trades with decent gains on Friday, managing to refocus attention on the $4,440 mark per ounce troy. Therefore, the precious metal reverses Thursday’s decline as the US Dollar alternates gains with losses at the end of the week.

Week ahead: Fed, BoJ and BoE decide amid inflation dilemma

A crucial central bank week looms for markets as both the Federal Reserve and Bank of Japan are under pressure from all sides, with their credibility at stake. The Bank of England looks set to have an easier ride, at least for now, while inflation releases will be watched too as war continues to rage in the Middle East.

CFTC Report: Japanese Yen reversal leads a broader positioning reset

The week in one sentence: Yen positioning swung back into net longs in the week to September 8, leading to a 103.0K-contract improvement. Canadian Dollar shorts also fell sharply, while Oil buying accompanied another price rise. Euro, Sterling and Swiss Franc positioning weakened despite firmer currencies, leaving those moves unconfirmed by speculative flows.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.