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AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.
USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.
Gold extends its consolidative price move, and languishes near the weekly low set the previous day amid a bearish fundamental backdrop. The US Dollar pauses for a breather following a strong rally to a nearly two-month high and offers some support to the commodity. However, the US Federal Reserve's hawkish outlook, elevated US bond yields, and persistent geopolitical uncertainties favor USD bulls.
The combination of energy prices rising back above $100 a barrel, US PMI’s topping multi-year indexes and FOMC members taking tough tones when discussing future rate paths have all led Treasuries at both ends of the curve with higher yields. Treasury Notes account for close to 52% of all marketable Treasuries, so movements in yields are especially painful for the US fiscal outlook.
The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.
