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The Aussie dollar faces renewed selling pressure following a sudden and robust overnight rebound in the US dollar.
The US dollar surged to fresh highs near the 105.00 barrier for the first time since mid-November on the back of stronger-than-expected US inflation figures. CPI rose to 3.1% YoY, above the expected 2.9%, with the monthly reading at 0.3%. Core CPI reached a 9-month high, printing 0.4% MoM, well above its long-term average of 0.3%.
Bond yields also saw a strong bounce, with the US 2 and 10-year reaching a YTD high in response to markets repricing of a potential Fed rate cut to a later date. Fed fund futures now favour a hold in May.
The US dollar strengthened against all FX majors. However, resistance looms around the 105 level.
Gold dropped below USD$ 2000 and recorded its worst day of the year. US equities also took a tumble, with the Nasdaq suffering its most bearish day since October.
Returning to the domestic scene, the AUD /USD pairing plummeted to new yearly lows, bottoming at 0.64541, with the potential for further decline towards the 0.6400 level seeming viable. The RBA’s recent hawkish hold, coupled with the tight labour market and solid fundamentals, could help maintain some downside pressure on the Australian currency.
As of writing, the pair is trading at 0.64581, losing -1.11% on the day.
The NZD/USD also fared poorly amid the US CPI-led bounce and lower inflation expectations from an RBNZ survey on Tuesday.
Today’s economic calendar includes UK CPI, along with EU employment and GDP data. Fed’s Goolsbee is also scheduled to speak overnight.
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