CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Australian dollar steady as China CPI cools ahead of US CPI

The Australian dollar drifted higher after Chinese CPI and PPI data; AUD/USD could be at the whim of broader moves in US dollar and US CPI later today could be the linchpin for markets but will it move AUD/USD?

The Australian dollar found some support after year-on-year Chinese CPI to the end of July came in slightly lower than expected at 2.7%, instead of 2.9% and 2.5% previously.

PPI over the same period saw a similar result, printing at 4.2% rather than 4.9% anticipated and 6.1% prior.

The easing of price pressures in China may reflect the sluggish performance of the domestic economy with rolling Covid-19 lockdowns across large commercial centres hampering activity.

The property Chinese sector continues to weigh on sentiment with Beijing announcing a review into the US$3 trillion trust industry by the National Audit Office.

In the background, the rise in some metal prices has helped AUD/USD rally from the two-year low in July. The US dollar peaking against many currencies at that time helped industrial and precious metals stem the slide, particularly iron ore.

Although iron ore prices are mostly struck in long term agreements by Australian exporters, the price fluctuations in near term futures contracts give an indication of the overall health of the market.

In particular, Chinese demand of the base mineral, which is seen to reflect the broader economic conditions there. A small dip in iron ore today has coincided with a slide in AUD/USD.

The focus now turns toward US CPI due out later today. The aftermath of the late July Federal Open Market Committee Meeting (FOMC) initially saw Treasury yields slide before a round of hawkish comments by Fed speakers turned that around.

The most significant development has been the inversion of the US yield curve. Overnight it went further south, with the closely watched 2s 10s spread approaching -50-basis points (bps) again. The Australian 2s 10s is at 31-bps.

An inversion of the yield curve potentially indicates a significant slowing of the economy.
In Australia, the 3s 10s is more closely watched due the liquidity provided by government bond futures contracts only being available in those tenors. It continues to slide today after the 3s 10s yield curve inverted to within a basis point of an 11-year low at 18-bps.

US CPI data will be closely watched and a reaction in Treasury markets could see US dollar volatility kick-off, which may provide the impetus for a significant AUD/USD move.

Metals snapshot: AUD, aluminium, copper, gold, iron ore, tin

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.