Last night the US inflation figures were released for the month of August. The figures were expected to be weak at 0.2%, however when the figure was released it came in below expectations at 0.1%. The USD pushed lower against the AUD initially. Those losses were regained by the end of the US session due to interest rate speculation.
The Federal Reserve’s meeting minutes showed that most Fed members saw improving conditions for a rate rise this year; however hikes are still not warranted. After last night’s release of the US inflation figures; inflationary conditions in the USA do not reflect an economy in need of monetary tightening.
Federal Reserve President Janet Yellen’s last comment to the public included her concern about inflationary issues in the US saying that due to the wage inflation levels, there is no support for the underlying inflation in the future. This meaning interest rate hike may be taking a step back for late this year.
Over to Australia, the latest reading from the Leading Index in Australia is also showing stagnant conditions for the economy. The index is based on 9 economic indicators; consumer confidence, housing, stock market prices, unemployment expectations, hours worked, commodity prices, and interest rate spreads. These figures started deteriorating in late 2013, from average figures of 0.5%, to an average figure of 0% within the 24 months. This figure is usually “baked into the cake” in respect to the exchange rate levels; as the aforementioned variables are known to the public, beforehand. However, the Leading Index result sums up the Australian economy quite comprehensively; that being ‘sluggish’.
All eyes are on tonight’s US release of the existing Home Sale and Philadelphia Manufacturing Index. Both figures are rate-sensitive publications and have been showing improvement. These are the last important figures out of the US for the week and therefore the last opportunity to provide the AUDUSD with some volatility before the weekend.