Australian Dollar rises as USD weakens broadly, with US inflation in focus

A 0.75% rise in the Australian Dollar on Monday comes as the US Dollar weakens across the board.
October brings a sharper-than-forecast slowdown in China's consumer inflation, but producer price inflation exceeds expectations.
With key inflation releases approaching, robust US jobs figures bolster expectations of a December interest rate rise.

A 0.75% advance on Monday takes AUD/USD to around 0.6915 at the time of writing, marking a sharp recovery. Widespread selling of the US Dollar (USD) lends support to the Australian Dollar (AUD), outweighing mixed Chinese economic figures and heightened expectations of additional monetary tightening in the United States (US).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

October's Consumer Price Index (CPI) in China, Australia's largest trading partner, rose 0.7% YoY, according to the latest figures. That was down from September's 0.9% and below the market forecast of 0.8%. Consumer prices were unchanged on the month, as expected, after a 0.2% rise the month before. By contrast, China's Producer Price Index (PPI) picked up to 5.7% YoY in October from 5% in September, exceeding expectations of 5.3%. Despite easing consumer price inflation, the larger-than-forecast rise points to continued inflationary pressure among producers.

Given the close trading relationship between Australia and China, this mixed assessment of the Chinese economy has particular relevance for the Australian Dollar's outlook. On Monday, however, the weaker US Dollar appears to be the main influence on sentiment, enabling AUD/USD to sustain its upward momentum.

Despite mounting expectations of a Federal Reserve (Fed) interest rate rise, the US Dollar Index (DXY) is down 0.44% on Monday at around 101.85. The index tracks the Greenback against a basket of six major currencies.

Markets are now assigning nearly an 80% probability to a 25-basis-point (bps) rate increase at the Fed's December meeting, according to the CME FedWatch tool. Behind this pricing lie the US economy's resilience and the Fed's commitment to returning inflation sustainably towards its 2% target.

Further support for that outlook comes from the latest US labour market report. October's Nonfarm Payrolls (NFP) rose by 165K, well above the 65K forecast and up from September's 60K reading. The Unemployment Rate, meanwhile, fell to 4.1%, against expectations of 4.2%.

Tuesday's US Consumer Price Index report is the next focus for investors, with the Producer Price Index release due on Friday. Should inflation exceed forecasts, expectations of a December rate rise could strengthen, potentially helping the US Dollar recover and putting pressure on AUD/USD.

In geopolitical developments, Qatar's Prime Minister is visiting Washington for talks intended to end the conflict, while US President Donald Trump downplays the prospect of further strikes against Iran. With these developments easing concerns in energy markets, West Texas Intermediate (WTI) Oil is down more than 3% on Monday, trading at around $86.85 at the time of publication.

US Dollar movements and the forthcoming US inflation figures will therefore be central to AUD/USD's near-term course. Those releases could alter market expectations for the Fed's next monetary policy decision.

Australian Dollar Performs Best Against Swiss Franc Today

Today's percentage moves in the Australian Dollar (AUD) against the major currencies listed are set out below. Its largest gain was against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.59%	-0.56%	-0.35%	0.02%	-0.74%	-1.42%	0.06%
EUR	0.59%		0.03%	0.28%	0.60%	-0.15%	-0.84%	0.65%
GBP	0.56%	-0.03%		0.23%	0.57%	-0.18%	-0.87%	0.62%
JPY	0.35%	-0.28%	-0.23%		0.34%	-0.41%	-1.10%	0.39%
CAD	-0.02%	-0.60%	-0.57%	-0.34%		-0.76%	-1.44%	0.04%
AUD	0.74%	0.15%	0.18%	0.41%	0.76%		-0.69%	0.80%
NZD	1.42%	0.84%	0.87%	1.10%	1.44%	0.69%		1.50%
CHF	-0.06%	-0.65%	-0.62%	-0.39%	-0.04%	-0.80%	-1.50%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, choosing the Australian Dollar on the left and following that row across to the US Dollar gives the percentage change for AUD (base)/USD (quote) in the corresponding cell.