US Dollar, Treasuries, Commodities. Where to for AUD/USD?

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  • The Australian Greenback went south on US Greenback resurgence
  • Commodities undermined AUD however iron ore may run into points
  • US yields are a spotlight forward. What would a peak imply for AUD/USD?

The Australian Greenback depreciated over the week as US Greenback energy and commodity weak spot dominated market focus. Rates of interest have intermittently impacted AUD/USD as yield spreads widened and narrowed, nevertheless it was rising US yields that lifted USD throughout the board.

US CPI arrived on Wednesday and dominated the week after an ‘eye popping’ outcome noticed headline annual CPI working at a 30-year excessive of 6.2% and core inflation at 4.6%. This led to Treasuries promoting off as US yields screamed larger, underpinning the US Greenback.

Danger belongings offered off within the melee and this additionally weighed on AUD as commodity costs remained underneath stress. Iron ore briefly traded underneath US$82 a tonne on the Dalian commodity trade in China, a good distance from the highs above US$200 seen earlier within the yr.

Iron ore might see costs beneath US$ 80 a tonne however there’s a level the place marginal producers turn out to be unprofitable, and it will not be that far off. This might see a stabilization in costs as soon as that scenario turns into obvious.

Early within the week, the NAB enterprise circumstances and confidence knowledge got here in stronger than final month, as did the Westpac client confidence survey.

The frustration for the Aussie got here by way of the roles’ numbers on Thursday. The unemployment price rose to five.2% towards 4.8% anticipated. Employment fell by 46,300 versus 50,000 that was anticipated to be added. The participation price edged as much as 64.7% from 64.5%.

It ought to be famous that the interval lined for knowledge was 26th September to ninth October. This didn’t seize a big proportion of the Australian inhabitants popping out of lockdown. Subsequent month’s jobs knowledge might be extremely scrutinised for measures of how the financial system is rising from Covid restrictions.

The week forward sees RBA assembly minutes launched however we’re unlikely to be taught something new from them. For AUD/USD, the principle stage might be US yields, and if the Fed stays the course or verbalisers any change in tack in financial coverage.

After the CPI launch, San Francisco Federal Reserve Governor Mary Daly re-iterated the ‘transitory’ mantra on inflation. The market has priced in 2 hikes by this time subsequent yr and is difficult the Fed’s timeframe for price rises. It’s potential the market has bought forward itself in dumping fastened curiosity. This may hinder US yields going a lot larger and in flip, offering ongoing assist for the US Greenback. AUD/USD might be caught on the sidelines.


Australian Dollar Outlook: US Dollar, Treasuries, Commodities. Where to for AUD/USD?

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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