- AUD/USD is stable in the 0.7140 area on Tuesday after Monday’s brief dip below 0.7100.
- Hotter than expected Australian CPI data is helping shield AUD from further risk appetite-related losses as US equities slide.
After coming within a whisker of hitting the December 20 lows just above 0.7080 on Monday but then subsequently recovering back to the 0.7150 area as Wall Street recovered, AUD/USD has remained resilient and trades flat near 0.7140 on Tuesday. That despite sentiment in US equity markets taking a turn for the worse again, which weighed on the pair this time on Monday. Stronger than expected headline US Consumer Confidence figures for January have also not been able to weigh substantially on the pair that has held in the 0.7120-0.7160ish ranges for most of Tuesday’s session thus far.
The Aussie is finding support following a hotter than expected Q4 2021 Consumer Price Inflation report out of Australia that showed the headline rate rising from 3.0% in Q3 to 3.5% versus forecasts for a rise to 3.2%. Importantly, the RBA’s Trimmed Mean measure of inflation rose to 2.6% from 2.1%, much larger than the expected jump to 2.4%, putting core inflationary pressures back above the midpoint of the RBA’s 2-3% target range two years earlier than the central bank forecast. The data helped to stoke RBA tightening bets, thus helping to underpin the Aussie and shield it from the risk appetite-related downside being seen in its antipodean counterpart NZD on Tuesday.
Despite current RBA guidance that there will be no rate hikes until late-2023/2024, money market futures are now nearly pricing a 15bps rate hike in full by May. “Next week the RBA will likely end its QE and bring forward the timing it expects to begin raising rates from late-2023/2024 (according to its current forecasts) to firmly into 2023” noted analysts at Credit Agricole. “At this stage, the RBA is unlikely to give up its forecast of no rate hikes in 2022 until it sees wages data in February” the analysts added.
If the RBA’s meeting next week underwhelms market expectations for a hawkish shift and a signal for rate hikes in 2022, that suggests downside risks for AUD/USD, a cross already hampered recently by deteriorating risk appetite and a strengthening dollar. Bears will be looking for a more sustained break below 0.7100 in the coming days/weeks which would open the door to a move towards December lows at 0.7000.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.