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AUS/USD Bears Continue To Monitor 0.6870 In Light Of The RBA Statement Of Monetary Policy, China Inflation, And Us Data
AUD/USD is under pressure near the intraday low and defends the most recent pullback from the weekly low. RBA SoMP indicates that the policy responds with a lag, keeping in mind the increase in interest rates that has already occurred. US Treasury bond yields sparked worries of a recession and also weighed on the Australian dollar. China CPI and early indications of next week's US inflation data will be critical for short-term direction.
In the early hours of Friday, AUD/USD lacks direction amidst mixed signals from the Reserve Bank of Australia's (RBA) Statement of Monetary Policy (SoMP). Inertia in the risk-barometer pair could be bolstered by a cautious outlook ahead of January data for the US Consumer Price Index (CPI) and China's Producer Price Index (PPI).
However, the RBA updated its economic predictions for Australia and emphasized the need for additional interest rate hikes. However, subsequent pronouncements such as the board's awareness of the already-implemented increase in interest rates and the policy's lagged effect appeared to have weakened the AUD/USD bulls.
Elsewhere, US Treasury bond yields grind higher after reinforcing recession concerns the day before, which exerts downward pressure on the AUD/USD exchange rate. Since 1980, the spread between the 10-year and 2-year US Treasury bond yields has reached its largest point. Notably, both of these important bond yields remain largely passive around 3.66 and 4.50 percent, respectively, as of press time.
Positively, the hopes of People's Bank of China (PBOC) rate reduction and the resumption of China-based companies' listing on US exchanges combined with US President Biden's calming of US-China anxieties following the China balloon shooting by the US to place a floor under the AUD/USD price. In addition, comments from Richmond Fed President Thomas Barkin questioning the Federal Reserve's (Fed) additional rate hikes and lower US Weekly Initial Jobless Claims pressured Aussie pair sellers.
Even after Wall Street's dismal ending, the S&P 500 Futures remain undecided, and Australia's ASX 200 has down at least 0.5 percent.
China's headline inflation data for January, especially the CPI and PPI, will be closely monitored in light of recent mixed economic signals from Australia's largest consumer. The earliest readings of consumer-centric data for February in the United States, such as the Michigan Consumer Sentiment Index and 5-year Consumer Inflation Expectations, will be key for establishing clear orientations. Given the optimistic projections for China and US data, the AUD/USD pair is likely to continue under pressure, barring any unexpected developments.
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