July 26, 2022 22:30 GMT
AUD/USD dipped post the Asia close, falling towards 0.6920 before support kicked in. We couldn't get back above 0.6960 though, amid broad USD strength. We currently track around 0.6945, slightly above NY closing levels.
- The A$ did see some outperformance against the EU bloc and continued to push higher against NZD. AUD/EUR is above above 0.6850, which is fresh highs back to April of this year. EU Recessionary fears edged higher overnight given agreed gas cut targets.
- Whilst the US equity lead was negative from overnight, US futures have opened firmer following better earnings after the close. This has aided AUD sentiment at the margin in early trade today.
- AUD/JPY is back above 95.00 in early trade today, versus an overnight low just above 94.55. The pair has run out of steam between 95.00/95.50 in recent sessions, although a lot will depend on how AU CPI prints today.
- The market expects headline inflation pressures to rise 1.9% QoQ, versus 2.1% in Q1. This would take YoY momentum to 6.3%. Trimmed mean, the RBA's preferred core measure, is forecast to rise 1.5%, taking the YoY pace to 4.7%.
- A firmer quarterly trimmed mean rise, say in the 1.7/1.8% range, may be needed to price in a more aggressive RBA outlook next week (75bps versus the roughly 50bps currently priced in).
- In the commodity space, iron ore saw some selling interest emerge above $112/tonne, but the trend still appears positive. Copper managed a gain as well, while thermal coal prices continue to trend higher both in Australia and China.
- There could be some impact from covid related disruptions to the Shenzhen district in China where a number of global companies have operations. This could be a focus point going forward.