On Friday, the Australian Dollar saw gains against the US Dollar following the release of data that showed inflation easing in the US. The US Producer Price Index (PPI) data indicated that inflation was on the decline, with the US Core PPI rising by 0.2% MoM as expected. The annual PPI declined to 1.8%, increasing the likelihood of a Fed rate cut. Swaps markets now show a 95.6% chance of a 25 bps Fed rate cut in November, up from 83.3%.
The Australian Dollar recovered some ground against the Greenback on Friday after a measure of prices paid by producers reaffirmed that inflation is coming down, warranting further easing by the Federal Reserve. The AUD/USD trades at 0.6748, registering modest gains of over 0.12%, though it is set to post weekly losses of over 0.60%. Data from the US Bureau of Labor Statistics (BLS) showed that the Producer Price Index (PPI) for September was 0% unchanged, below August’s 0.2% Month-on-Month increase. Excluding volatile items, the so-called Core PPI expanded by 0.2% Month-on-Month as expected, down from 0.3% a prior month.
The swaps markets show the Fed’s odds for a 25 bps rate cut at 95.6%, substantially up from 83.3% a day ago, when traders trimmed their positions on hawkish remarks by Atlanta’s Fed Raphael Bostic, who said he is open to cut or hold rates at the upcoming two meetings. In other data, the University of Michigan (UoM) revealed that Consumer Sentiment deteriorated slightly from 70.1 to 68.9 and missed the consensus. Americans turned pessimistic due to higher living costs, while they upward revised inflation expectations from 2.7% to 2.9% over one year.
Chicago Fed President Austan Goolsbee crossed the wires on Bloomberg, praising the progress on inflation and the labor market. He added that despite the goodish September jobs report, there are no signs of overheating. Next week, the Australian economic docket will be scarce, with the Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter crossing the wires on October 15.
On the US front, the calendar will feature Fed speakers, the Balance of Trade, Retail Sales, Initial Jobless Claims, Industrial Production and housing data. From a technical standpoint, AUD/USD is in consolidation but with a slight upward bias. For buyers to resume the uptrend, they need to break above the October 9 high at 0.6761, allowing them to challenge the weekly peak at 0.6809. Conversely, if sellers step in and push the exchange rate below the 50-day moving average (DMA) at 0.6733, it could open the door for a decline toward the 100-DMA at 0.6691.
