Australian Dollar Climbs Following US Inflation Release

Australian Dollar (AUD) Supported by Risk-On Trading

The Australian Dollar (AUD) gained against its peers yesterday as markets embraced a risk-on mood following the release of US inflation data. Earlier in the session, falling inflation in China applied moderate AUD selling pressure.

Registered Covid case numbers in NSW exceeded 50,000 during the Asian session, as the government’s new app allowed people to input positive rapid antigen test results: however, authorities were not overly alarmed as the figure included a backlog from 1 January.

A lack of data today leaves the ‘Aussie’ to trade on external factors – if market sentiment remains upbeat, AUD could continue to enjoy tailwinds.

Pound (GBP) Tumbles over Domestic and International Politics

The Pound (GBP) trended down against its peers midweek as political tensions weighed upon Sterling sentiment.

Brexit concerns were revived as Foreign Secretary, Liz Truss, threatened to invoke Article 16. Some speculate that Truss may be motivated by her position as a candidate for the Tory leadership.

Elsewhere, Boris Johnson faces criticism from MPs in his own party, as well as opposition party members, over allegations that he attended a garden party during lockdown.

The Pound may struggle for direction today given a lack of significant data, although declining Covid case numbers could extend some support.

Euro (EUR) Wavers on Weakening US Dollar

The Euro (EUR) traded in a mixed range on Wednesday, tumbling in advance of the US inflation release only to reverse losses as Core CPI exceeded forecasts. Later in the session, EUR sank once more as improving market mood bolstered its risk-on rivals.

Lending some support earlier in the day, Eurozone industrial production exceeded expectations, climbing by 2.3% in November as opposed to the 0.5% forecast.

Looking ahead, the single currency may be buoyed today by speeches from European Central Bank (ECB) officials: earlier in the week policymaker Joachim Nagel struck a hawkish tone, suggesting that inflation pressures may not be entirely transitory.

US Dollar (USD) Weakens as US Inflation Meets Expectations

The US Dollar (USD) fell yesterday as the US consumer price index reported domestic inflation surged to 7%.

With the US inflation figures printing in line with expectations, the US Dollar appeared to be undermined by some repositioning by USD investors who had priced in another above forecast reading.

Into today, an increase in US Producer Price Inflation (PPI) may extend concerns that price pressures are getting out of control.

Canadian Dollar (CAD) Slides on Retreating WTI Prices

The Canadian Dollar (CAD) was muted in midweek trade as the price of WTI crude oil dropped from session highs. A lack of significant Canadian data exerted further downside.

New Zealand Dollar (NZD) Strengthens with Risk Appetite

The New Zealand Dollar (NZD) firmed against most of its peers on Wednesday as risk sentiment improved. Lower-than-expected Chinese inflation appeared to have little effect on NZD trading.

Data Releases

Jan 13th 20:30 EUR ECB De Guindos Speech N/A
Jan 13th 21:30 EUR ECB Hakkarainen Speech N/A
Jan 13th 23:00 USD Fed Harker Speech N/A
Jan 13th 23:30 USD Initial Jobless Claims (8/Jan) 200K
Jan 13th 23:30 USD Core PPI Dec 8%
Jan 14th 00:30 EUR ECB Elderson Speech N/A
Jan 14th 01:00 USD Fed Brainard Testimony N/A
Jan 14th 04:00 USD Fed Evans Speech N/A


Mathew Andrews