Bad US Inflation News Weighs On AUD

The AUDUSD plunged almost 2c after the US CPI report showed that inflation is not abating as expected, and ended the session at 0.673. It has started the Australian day around this level. The AUD ended the day down 2.3% and the worst G10 performer after the NOK.

• US August inflation not only surprised to the upside, but the core signalled that it is yet to fall and concerns of a wage-price spiral really began to emerge. Equity markets fell across the board and the VIX peaked at 28%, as risk appetite plummeted in the face of increased Fed tightening expectations.
• AUD came up against resistance at the 50-day EMA of 0.6910 but went through the September 9 low but not the September 7. The next level to watch on the downside is the bear trigger of 0.6682 (July 14 low).
• With the loss of risk appetite, some commodities weakened with oil losing 0.5% and copper down 3.8% from its peak earlier in the day. However, other metals were supported by power-related supply issues, such as aluminium. Iron ore moved up helped by the start of the Chinese construction period and traded at $103-104.