AUD: War risks challenge recent strength – Societe Generale

FXStreet Insights Team FXStreet

Societe Generale analysts argue that the Australian Dollar’s (AUD) strong year-to-date performance leaves it vulnerable to concerns over imported petroleum dependence during the Gulf blockade. They discuss potential short AUD/NZD and short AUD/CAD ideas, while stressing that any easing of the United States (US) blockade could quickly reverse Australian Dollar weakness and keep volatility suppressed.

Petroleum exposure weighs on Australian Dollar

"My first thought was that the Australian dollar has had a great run this year (up 8 ½% including interest against the USD) but is now, once again, vulnerable to concerns about dependence on imported petroleum products."

"I’ve written before about Australia’s trade surpluses in coal and natural gas, which are twice as big as deficits in diesel/petrol/jet fuel."

"Shorting AUD/NZD at current levels isn’t without merit after a 12% rally over the last year. Shorting AUD against CAD has obvious appeal."

"The trouble with both those trades is that if President Trump decides to (even temporarily) ease the Gulf blockade in order to facilitate a new round of peace talks, the AUD might take off like an overexcited kookaburra."

"No wonder there’s no volatility."

(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 bounces-off weekly lows near $4,300 as focus shifts to US CPI

Gold rebounds from its lowest level in over a week, near $4,310, in the Asian session on Friday as rising Fed rate-hike bets, bolstered by US PPI, underpin the US Dollar. Traders now look to the US CPI report for more cues about the Fed's policy path amid inflation risks stemming from higher energy prices due to the Middle East conflict. The outlook will drive the USD and influence the non-yielding bullion.

Ethereum holds above $2,400 as PPI data strengthens rate hike expectations

Ethereum (ETH) is down 0.7% on Thursday as the second-largest cryptocurrency looks to recover from earlier pressure following the release of stronger US inflation data. The Producer Price Index (PPI) for final demand rose 0.4% in August, matching market expectations after a revised 0.1% increase in July, according to the US Labor Department.

Dollar comeback case 'a decent one' – September Fed hike 'back in play'

The dollar was left nursing heavy losses against most of its major peers after last month’s Treasury buyback wobble. Notwithstanding this, we think that the case for a near-term bounce in the greenback is a decent one. Warsh's hawkish pivot at Jackson Hole, followed by what was a blowout US payrolls report for August, has put a September rate hike from the Fed back in play.

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.