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24 Jul 2022

AUD/USD traders get set for a potential wild ride in economic events

  • AUD/USD ended on the front foot for the week ahead of key inflation data. 
  • The US dollar is in focus as traders get set for the Fed. 

AUD/USD came under pressure on Friday in the final stages of the New York day, falling 0.14% from a high of 0.6977 to print a low of 0.6893. However, the US dollar has also been giving ground back to the antepodenas due to a retreat in US rate hike expectations while in contrast, they are building up for the Antipodes that were ending with solid gains for the week

The US dollar came under pressure last week due to a better risk mood while rival currencies that are playing catch up with their central banks moving more in line with the Federal Reserve. The European Central Bank raised interest rates by more than expected, while mixed US data last week has had money markets paring back expectations for a super-sized US rate hike. This has weighed on US yields.

Meanwhile, the FOMC is expected to follow up June's large 75bp rate increase with a similar move in July. ''In doing so, the Committee would bring the policy stance to its estimate of the longer-run neutral level,'' analysts at TD Securities said. ''We also look for Chair Powell to retain optionality by leaving the door open to additional 75bp rate increases.''

Meanwhile, Australian Consumer Price index data this week is expected to come in hot and in line with an uber hawkish Reserve Bank of Australia rhetoric. Analysts at TD Securities explained to expect outsized headline/ underlying prints vs consensus. ''The magnitude of the increases for the main drivers are: 1) Housing 3.2% QoQ; 2) Food 2.25% QoQ; 3) Transport 2.3% QoQ; 4) Household Services 1.65% QoQ & 5) Recreation 1.2% QoQ. Our headline f/c implies the peak is likely to exceed the RBA's 7% year-end target & warrants at least a 50bps Aug hike.''

As for how far the RBA will need to go to tame inflation with Australia's benchmark cash rate, NAB now expects it to peak at 2.85% by the end of the year, while Westpac sees the peak at 3.35% by February next year. Both previously forecast a peak of 2.6%. Markets are pricing about a 15% chance of a 75 basis point rate hike in August. 

From a bullish perspective, analysts at Rabobank expect AUD/USD to hold around current levels on a 1-to-3-month view, but they see scope for the currency pair to edge up to 0.70 on a 6-month view and 0.74 in 12 months.

 

Jul 23, 2022

GBP/JPY Price Analysis: Shifted downwards in the near-term unless bulls reclaim 164.00

The GBP/JPY slides for the third straight day creep below the 50-day EMA at around 163.51, spurred by a dismal market mood, blamed on US companies mis
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Jul 25, 2022

EUR/USD stalls as the greenback bulls rethink ahead of the Fed

EUR/USD bulls have moved in from below parity in a correction of three prior weeks of supply. The single currency ended down 0.13% on the final day of
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