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Idea of the Day

The latest inflation data in Australia was stronger than expected, which initially pushed the Aussie higher, but sellers emerged around the 0.9750. The price action reflects the fact that the Aussie has had a strong run higher over the past two weeks and yesterday pushed above the 50% retracement level of the year’s down-move from the January highs to the August lows. Certainly, there’s no chance that the firmer numbers are going to prompt the RBA to raise rates after the recent run of rate cuts, which is another reason why the gains proved to be transitory. Still, the Aussie continues to stack up well, especially if we are entering a period when concerns regarding budgets and debt are going to come to the fore again (Australia still secure in its triple-A rating).

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Data/Event Risks

GBP:  The minutes to the October MPC meeting are released this morning. Expectations of further easing have been reigned in over recent months so impact on sterling likely to be more limited.

Latest FX News

AUD:  Prices were up 1.2% in the third quarter, leading to an annual rate of 2.2% (from 2.4% in the previous quarter). The Aussie peaked at 0.9758 before falling back soon after the numbers, with daily charts suggesting AUDUSD is still near to over-bought territory.

JPY:  In the wake of the payrolls numbers yesterday, the yen was the weakest performer and gave back all the gains vs. the dollar soon after the release. Buyers have emerged overnight, pushing USDJPY below the 97.50 level

USD:  The dollar losses seen in the wake of the employment report have been largely sustained, the Aussie being the main exception. The dollar index is back to levels last seen since early February.

Further reading:

Gold Pushes Higher on U.S. Data Release

Traders waited September payrolls from the US and Chinese equity markets pressured lower by rising inflation