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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
AUD
AUD/USD sits close to session lows, last in the 0.6575/80 region, as the markets continues to digest the weaker than expected Q4 CPI outcome (lows at 0.6572). We have also had China PMI's print, with manufacturing a touch weaker than expected, which has presented an addition headwind.
- Key support is seen at 0.6525, lows recorded in early Dec and on Jan 17. The 50-day EMA sits higher at 0.6626.
- Yield differentials for AU-US spreads remain off recent highs. The US leg of this spread is likely to remain the bigger driver in the near term.
- The chart below plots AUD/USD versus the short term market expectation around the policy rate differential in 1 year's time. So, whilst it's still expected to be +20bps in AUD's favor, we are down from recent highs of around +50bps.
- We still may see the RBA push back against rate cut pricing (similar to the RBNZ) given elevated domestic inflation pressures.
- There isn't much in the way of further domestic risks until next Tuesday's RBA meeting, so the FOMC later will be in the drivers seat, although spill over in terms of China equities/commodity moves can also impact sentiment for the rest of today's local session.
Fig 1: AUD/USD Versus 1yr Ahead Policy Rate Expected Policy Rate Differential With The US
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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