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AUD/USD Investors Flirt With 0.6700 Resistance On Upbeat Australian Data And Softer US Inflation Indicators
The AUD/USD pair retreats from its intraday peak but recoups its early-week losses. The Westpac Consumer Confidence for July matched optimistic forecasts, while the NAB figures for June were stronger. The combination of low inflation expectations and a disappointing employment report casts doubt on hawkish Fed discussions. The US Consumer Price Index (CPI) on Wednesday will be crucial as China-related concerns motivate Aussie-dollar purchasers.
AUD/USD justifies upbeat Australian sentiment data and cheers on broad US Dollar weakness as investors test the key 0.6700 resistance level on Tuesday morning. In doing so, the Aussie pair also benefits from declining US inflation expectations and a weaker US employment report, while ignoring recent hawkish Fed comments and easing inflation concerns in China.
Australia's Westpac Consumer Confidence for July increases 2.7%, matching analysts' expectations, compared to 0.2% previously, while the National Australia Bank's (NAB) monthly business sentiment figures for June also indicate positive outcomes. However, the NAB's Business Conditions index improves from 8 to 9, while Business Confidence increases from -4.0 to 0.
The latest US inflation expectations signalled concerns of deflation, particularly in light of China's disappointing Consumer Price Index (CPI) and Producer Price Index (PPI) from the previous day.
Nevertheless, the Federal Reserve Bank of New York's monthly Survey of Consumer Expectations indicates that US consumers' one-year inflation expectation decreased to 3.8% in June from 4.2% in May, the lowest level since April 2021.
The decline in US inflation data follows Friday's disappointing employment report, which weighed heavily on the US Dollar. It should be noted that the most recent US employment report for June was a negative surprise and dealt a major setback to the US Dollar, causing it to suffer its largest daily loss in three weeks on Friday. However, China's disappointing inflation data on Monday sparked concerns of deflation in the world's largest industrial player, allowing the US Dollar to lick its wounds.
However, Federal Reserve (Fed) officials continue to be hawkish and encourage AUD/USD investors. Monday, Mary Daly, president of the Federal Reserve Bank of San Francisco, stated, "We'll likely need a couple more rate hikes this year to bring inflation back to the Fed's 2% target." In a similar vein, Loretta Mester, president of the Federal Reserve Bank of Cleveland, stated that the Fed will need to tighten monetary policy "somewhat further" to reduce inflation. In addition, Michael Barr, vice chairman for supervision at the Federal Reserve, stated, "We are quite attentive to bringing inflation down to target."
S&P500 Futures track Wall Street's positive performance amidst these manoeuvres, while US Treasury bond yields remain under pressure. However, the benchmark 10-year US Treasury bond yields posted their first daily decline in July the day before, while the two-year counterpart declined for the second consecutive day, to near 4.00% and 4.86%, respectively.
Ahead of the crucial Wednesday, AUD/USD pair traders should focus on risk catalysts for intraday direction as the economic calendar appears largely vacant.
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