AUD/USD trades at 0.6890, supported by a 5.7% jump in China's October PPI, even as strong US jobs data and near-80% Fed hike odds provide a potential headwind for the pair.
AUD/USD rises to around 0.6890 after two days of losses as the Australian Dollar strengthens following China's October CPI of 0.7% YoY and PPI of 5.7% YoY (above the 5.3% consensus), while the US Dollar declines. A softer-than-expected US Dollar and resilient Chinese producer prices support the pair. However, strong US jobs data (NFP 165,000 vs 65,000 consensus) and near-80% odds of a December Fed hike could cap gains.
The US Dollar declines even though odds of a 25-bp hike at the December 8-9 FOMC have risen to near 80%, suggesting fading hike expectations. ABN Amro notes a flight to quality into US Treasuries, and if Treasury yields keep falling the Dollar may struggle to draw support from risk-off episodes. Strong NFP data is a counterweight.
China's October CPI rose 0.7% YoY, below the 0.8% consensus and down from 0.9% in September, which is typically bearish for the Renminbi, but PPI jumped 5.7% YoY, beating expectations of 5.3%. The mixed inflation picture limits a clear directional effect on the currency.
The AUD/USD pair climbed to 0.6890 on Monday, snapping a two-day losing streak as stronger-than-expected Chinese producer prices bolstered sentiment. Despite rising odds of a December Fed rate hike, the US Dollar softened as investors sought refuge in Treasuries amid ongoing financial market stress.
AUD/USD is trading around 0.6890 after rising for the first time in three days, supported by China's stronger-than-expected PPI (5.7% YoY) from Australia's close trading partner and a softer US Dollar.
Strong US jobs data (NFP up 165,000 in October) and near-80% odds of a Fed rate hike on December 8-9 could lift the US Dollar, and hotter-than-expected US CPI on Tuesday or PPI on Friday would add pressure.
Analysts at ABN Amro point to a flight to quality into US Treasuries and a reassessment of the need for further tightening amid market stress, so the Dollar may struggle to gain if Treasury yields continue to decline.
It was mixed: consumer inflation of 0.7% YoY came in below the 0.8% forecast and slowed from September, which weighs on the Yuan, but producer prices rose 5.7% YoY, well above the 5.3% consensus, offsetting the negative read.